What You Need to Know About the DOL Fiduciary Rule

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Published by Taylor Financial Group

There has been much talk lately about the “Fiduciary Rule” and what it means to retirement investors and the industry. The Rule was set to go into effect in April, however, for now, the Rule is temporarily on hold until further examination.

President Trump issued an Executive Order on February 3, 2017 instructing the Department of Labor to further evaluate the Fiduciary Rule to determine how it will affect Americans in gaining access to retirement information and financial advice. As a result, future delays to the Rule’s implementation are likely. Having said that, the initial passage of the Rule has already had a far-reaching impact on the industry, so we believe it best to discuss it now.

What is the Fiduciary Rule?
The Fiduciary Rule redefines who is considered a “fiduciary” in connection with managing IRAs and retirement accounts, among other things. In short, advisers who provide investment advice will be required to adhere to higher standards. These standards oblige advisers to make prudent investment recommendations in the client’s best interest, charge only reasonable compensation, and make no misrepresentations to their clients regarding their investments.

Many entities/persons are affected by the Fiduciary Rule, such as:

  • Investment Advisers
  • Insurance Agents
  • Broker-Dealers
  • Retirement Account Providers
  • Life Insurance and Annuity Companies

Investment advisers and firms are already subject to similar fiduciary standards, but broker-dealers and insurance agents are not. We, and many other fee-based advisors, have been following “fiduciary” standards for years, regardless of the Rule.

What is a Fiduciary?
Simply put, a fiduciary is a trusted advisor or organization that is held to the highest good-faith standard and trust. A fiduciary is required to make decisions on an informed basis and with their clients’ best interest first. When it comes to wealth management, a fiduciary ensures that no conflict of interest exists and that their own personal profits are not the priority.

Many advisors have already taken steps to adapt to the Rule. At Taylor Financial Group, we always take the time to personally know our clients and their priorities, and are always working on how to best pursue our clients’ needs and goals. All of our decisions and recommendations are made with our clients’ best interests in mind. By providing comprehensive services, offering reasonable value-based fees and being transparent about the costs associated with investment planning, we are able to maintain a high level of trust with our clients and follow fiduciary standards.

BICE (Best Interest Contract Exemption)
BICE is intended to allow firms and advisors to continue to rely on many current compensation practices (such as commissions) if they adhere to the impartial conduct standards and implement a number of disclosures, policies, and procedures.

Benefits of the DOL Rule
As mentioned above, the main objective of the Rule is to ensure that the best-interests of our clients are the first priority. This Rule also encourages transparency, impartial conduct standards, informed recommendations and due diligence. Under the Rule, the way in which advisors provide retirement advice will be strictly governed, possibly requiring a lot more paperwork and documentation in order to be compliant. The temporary hold on the Rule will help determine the appropriateness of these additional compliance burdens.

Maintaining Trust in the Industry
As a fiduciary, we value the relationships we build with our clients and promote their full awareness of the investments and services we offer. Regardless if the DOL Rule becomes officially delayed, amended or withdrawn, putting the clients’ best interest first and foremost will always remain a core value of ours. By offering high-quality client service along with fee based compensation, we will continue to focus on trust, transparency and accountability consistent with the Fiduciary Rule.

 

Sources:
LPL Financial Department of Labor Fiduciary Rule FAQs
Salesforce Financial Services, A System of Engagement to Navigate the DOL Fiduciary Rule
MorningStar Advisor, Breaking Down the 3 Key Elements of the DOL Fiduciary Rule

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