There are only three ways for a broker, advisor or insurance agent to engage with retirement plan rollover clients without triggering the Department of Labor’s new fiduciary rule and firms are still exploring whether they can take advantage of these exceptions, ERISA specialist Fred Reish said in an interview.

The workarounds entail using a “hire me,” “education-only” or “unsolicited” approach to working with rollover investors, he said. Meeting the requirements of any of the rule's exceptions, however, is getting tougher because for the first time the DOL’s new rule includes a "one-time advice” caveat that triggers fiduciary responsibility, said Reish, an attorney at the law firm Faegre Drinker who specializes in compliance issues.

Effective September 23, with a one-year grace period for full compliance, the 476-page DOL rule extends the fiduciary standard to anyone selling investment advice to plan participants and IRA holders, for the first time including insurance agents and brokers. This means that professionals who accept compensation must ensure that rollover investment recommendations to retirement plan and IRA investors are in the client's best interest. For the first time, advice professionals must also document all of the alternative investments and their costs that were considered.

“I believe that firms are still considering how to approach the rule and it will vary depending on the type of financial institution,” said Reish, who works with broker-dealer, registered investment advisor and insurance industry clients. “For example, some smaller broker-dealers and investment advisers have been using the education approach and I think that, for now, they will continue to do so. However, the one-time recommendation fiduciary definition will make it harder to stick to an educational approach."

For the first time, the DOL has mandated that one-time investment advice be treated as fiduciary advice.

Some investment advisory firms will allow advisors to say that new clients were unsolicited when they had a pre-existing relationship with the new client, but will not if there isn’t a relationship, he said. The unsolicited carveout would cover situations where clients with existing relationships ask for a rollover.

In regards to the "hire me" approach, the rule states that an investment advice provider can recommend that a retirement investor enter into an advisory relationship with the provider without acting as a fiduciary, according to Reish.

“People are just getting used to the 'hire me' approach from a legal perspective. However, I suspect that many advisors and firms have been using ‘hire me’ as a nonfiduciary approach but without calling it that,” he said.

Reish predicts that “by and large, insurance companies will treat new sales as recommendations. That, at least partially, is a recognition of the fact that insurance agents have traditionally made recommendations and will continue to do so." As a result, they will not be able to use the carveouts to becoming advice fiduciaries, he said.

As for using the education approach, the DOL has long held that investment education, if properly done, is not a recommendation and therefore does not cause the provider to be a fiduciary, Reish said. The DOL clarified in both the preamble and rule itself that the mere provision of investment information or education, without an investment recommendation, is not advice within the meaning of the new rule.

“However, it is not enough to just label a communication as education. As you might imagine, the information must be truly educational. My belief is that one test is whether the information is materially complete and unbiased,” Reish said.

The DOL rule states that “in general, for purposes of the final rule, the line between an investment recommendation and investment education or information will depend on whether there is a call to action.”

Any call to action is also likely to be a deal breaker since an investment recommendation will trigger the rule, Reish said. “A key to knowing where the line is between education and recommendation is the individualization of the information. The more individualized the communication, the more likely it is a recommendation,” he said.

To avoid the potential of “education” becoming recommendations, firms should ensure they have training and supervision and hopefully supporting documentation for the education that they will be delivering, Reish said.