Advisory firms that want to offer sales only or just education when working with retirement rollover investors still have ways to maneuver and get exemptions under the new fiduciary rule. But those working arrangements should be very specific and carefully scripted to avoid violations, said Jason C. Roberts, founder and CEO of the Pension Resource Institute on Tuesday.

The rule, which goes into effect September 24, 2024, defines when a professional becomes a fiduciary investment advisor and must put client interests first … but it also offers some exemptions from those obligations in cases where advisors are accepting compensation for investment recommendations to private plans, participants and IRAs. 

With regard to the carve-out for professionals who want to act purely as salespeople, Roberts said, the “DOL put right into the rule itself and in the preamble … that a salesperson making a recommendation to purchase a particular investment or pursue an investment strategy [will not be seen as offering fiduciary advice] if the person doesn’t hold out as a fiduciary advisor.”

The DOL specifically said in the rule that a professional is acting as a fiduciary advisor if they make a recommendation about securities or an investment plan, communicate in a way that encourages the investor to take action and either represents him- or herself as a fiduciary directly or offers “expert, individualized advice that the client can rely on as being in their best interest,” Roberts said. 

The carve-out for pure sales activity requires that activities should be specific and scripted by broker-dealers, banks or insurance companies that make the decision not to offer fiduciary advice. The same is true for firms that want to take an “education-only” approach to working with prospective rollover customers, Roberts added.

“With the education-only approach, it means I’ve only advised you on your plan. You can go elsewhere or you can roll over with me,” the veteran attorney said.

It’s become harder to use sales-only or education-only strategies, however, since individual investment recommendations can trip the fiduciary rule. 

“The question is to what extent are these approaches still viable? Advice providers will not be able to avoid [becoming fiduciaries] by focusing solely on investments,” Roberts said.

At the same time, the DOL said it will be a violation if you recommend a rollover without contemplating how the money will be invested, which further complicates any carve-outs from the rule, he noted. “We think we’ll see firms create call centers and websites and such that can be crafted in a way where the message will be education only. … But it’s difficult for those who want to help clients to really stick to the type of limited script an educational-only approach will require.”

Another area Roberts said he is watching closely is the so-called “hire me” doctrine, which allows sales professionals to market their services without crossing into fiduciary territory. “What DOL has said is if you go further than marketing your own services and touting the reputation of your firm—and get into products and strategies—then you’re outside of ‘hire me’ and back into fiduciary advice,” he said.

Firms and their representatives “will be able to provide general investment and portfolio construction advice,” he said, “but the minute they become individualized, and that communication signals this will be good for you, you’ve crossed the line,” Roberts warned.

Will unsolicited rollovers initiated by a customer be categorized as fiduciary advice by the DOL? Roberts said it’s unclear whether such transactions will be challenged by the department. It depends on the specific facts and circumstances of an engagement.

Even in instances where a client asks what paperwork they should fill out, the fact that an advisor is recommending a specific custodian for rollover could possibly serve as a trip wire for the fiduciary rule and its obligations. Recommendations about rollover destinations are covered by the final rule, he noted.