Leaving options off the approved list was a “glaring exclusion,” TD Ameritrade told the DOL. The firm believes the guidance it gives do-it-yourself investors could cause its branch and service personnel to become fiduciaries under the rule. (The DOL says that providing information and materials that constitute investment or retirement education will not trigger fiduciary status.)
This month, TD Ameritrade urged its retail clients to write to the DOL and complain about the government determining “that I am not smart enough to make my own informed investment decisions.”
Variable annuities, although on the approved list, could be problematic under a “reasonable compensation” standard that advisors would be held to.
“Reasonable compensation is defined in the BICE as relative to the value of specific services provided, [but only] services provided by the financial advisor, not the fees for the [product’s] guarantees,” said Lee Covington, general counsel at the Insured Retirement Institute (IRI), which represents variable annuity sponsors.
Proprietary annuities will look especially bad because the fees earned by the captive insurer will be included in the total compensation amount.
“We’ve heard the DOL may be willing to change the BICE” to conform more to an existing exemption that takes into account the fees for annuity guarantees, Covington said in an interview.
That existing exemption, with some proposed modifications, will apply to fixed annuities under the DOL plan and allow insurance agents to sell the products to IRA owners.
Reish expects the DOL will make a “significant number of changes to the fiduciary package, and particularly to the BICE” that will make the proposal more workable.
But as far as dropping the approved list completely, forget about it, said Grace Vogel, a managing director at PwC’s financial services advisory practice and a former top regulatory official at Finra.
Vogel expects the DOL to keep the list “pretty close to where it is today.”