On April 6th, 2016, the Department of Labor issued their final fiduciary ruling. While it may take some time for the industry to fully understand the implications of the ruling and procedures, here is what we know:
The Department of Labor (DOL) finalized a change to the definition of fiduciary that expands the scope of those who become fiduciaries. The DOL rule requires that advisors put their client’s best interest first by providing impartial retirement plan advice.
To receive commissions on product sales, they must qualify for a best interest contract exemption or BICE. That means inking a contract with clients that: (1) commits them to providing advice in the client’s best interest; (2) warrants that the firm has adopted practices and procedures designed to mitigate potential conflicts of interest when providing advice.
The proposal also calls on brokers to “clearly and prominently” disclose conflicts of interest, including hidden fees buried in the fine print or backdoor payments. Brokers must also direct the clients to a webpage disclosing their compensation arrangements; and communicate that clients are entitled to complete information on the fees they charge.
The final rule will be effective on or about June 8, 2016. Implementation will be phased, with full compliance to the rule no later than January 1, 2018.