Cipperman says his firm has been “telling our broker-dealer and dual registered advisors that being a fiduciary is the way the world is going anyway. They should have been ready for the original April 10 deadline [which was postponed until June 9], so they should be ready for this one.”
“Advisors should be training themselves and their staffs on what it means to be a fiduciary. The term ‘fiduciary’ has hit the mainstream. We firmly believe that those who embrace the fiduciary standard have an opportunity to both improve investor outcomes and their own business prospects,” says John Faustino, chief product and strategy officer at Fi360 based in Pittsburgh, a provider of fiduciary-related training and tools for advisors.
James DelBello, partner at Reed Smith, a global law firm that serves financial advisors, says Donald Trump’s election made the fate of all types of regulations uncertain, “but the amount of scrutiny the rule has been under has drawn attention to the issue of conflicts for financial advisors and broker-dealers. For advisors, looking at their compensation stream makes sense.”
Acosta already has indicated there will be no enforcement of the rule until January 1.
“DOL is developing models and notices for advisors to use and as long as advisors have adopted these practices, they should be fine,” says labor attorney James Olson, a partner with the Philadelphia-based law firm Schnader Harrison Segal & Lewis. If lawsuits are filed under the new rule, “they are going to come from clients who have IRAs rather than from participants in employer-sponsored retirement plans,” he says.
Doug Dahl, an employee benefits attorney at Bass, Berry & Sims in Nashville, adds some advisors may decide to exit the retirement planning sector of the financial industry or they may close up shop altogether rather than deal with lawsuits and enforcement issues.
“The DOL likes to talk about how this rule is based on principals, but it is very complex, and it converts even ordinary suggestions from an advisor into regulated advice,” says Steven Rabitz, a compensation/benefits partner with Stroock law firm in New York City who specializes in ERISA law. “I would expect there to be more surveillance and more compliance issues. This will put a lot of assets in motion and consumers in motion. DOL has grossly under estimated the amount of disruption implementing this rule is going to cause.”
Mike Walters, chairman and CEO of USA Financial in Ada, Mich., which has $2.7 billion in client assets, says, “I don’t see someone from DOL or the IRS circling to look for easy pickings among advisors who are not immediately compliant. This is going to be an eye opener for many advisors. They do not realize they are going to have to prove that they disclosed the required information. The biggest challenge that advisors may be overlooking is whether they fall under the exemptions that are allowed under the rule.”
DelBello at the law firm Reed Smith says, “The more technical requirements of the rule present challenges and setting up the internal operations needed to meet the rule are massive. There is not going to be a ‘gotcha‘ by the DOL or IRS for someone who is not totally compliant.”
For firms that are still striving to meet the rule, Alma Angotti, managing director in the global investigations and compliance practice at Navigant Consulting, a global business and financial services consulting firm based in Chicago, advises, “For firms that are behind the eight ball, we’re telling them to do the things that make sense first, such as providing training for staff on sales practices for IRAs. They should also have the policy ready to change compensation structure.