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New Advisor Rules Coming for IRAs and Retirement Plans

New Advisor Rules Coming for IRAs and Retirement Plans

Ron Kelemen - Tuesday, February 21, 2017
Last June we wrote about the Department of Labor’s (DOL) new Fiduciary Rule.  At that time, it had been in the works for many months, but it finally takes effect on April 10 this year, and a few remaining details take effect in January 2018.

The thrust of the 1,000-page rule, three-years in the making, is to require that anyone who provides advice regarding IRAs and 401-k rollovers to adhere to the Fiduciary Standard.  Previously, this standard for advice applied to only employer-sponsored retirement plans, such as defined benefit pensions and 401-k plans.  The rule does not affect non retirement account business.

Fiduciary—(adj) Involving confidence or trust; (n) held or holding in trust for another.

In the financial world to be a fiduciary means putting the clients’ interests first. The duty is to the client, not the company.  
The rule will make it difficult for many in the insurance and brokerage business to sell products in the IRA marketplace, especially when propriety products and variable compensation are involved.  Most of the financial services lobbies have worked hard to delay or stop the rule from taking effect.  Legislation has already been introduced to repeal it, and President Trump signed an executive directive on February 3 that directs the Department of Labor to postpone the effective date until it could review the impact on the rule.  On February 9 a Texas circuit judge blocked an industry suit to stop the rule.  Perhaps the rule may eventually be altered or repealed, but as things stand now, the rule goes into effect April 10. 

As fee-only advisors regulated by the Securities and Exchange Commission (SEC), we already operate as fiduciaries to all clients, not just retirement accounts.  Although we will have some additional disclosures, paperwork, and minor operational tweaks required by the rule, we don’t see any major changes in the way we operate and provide advice to our clients. Our duty is to you, the client. Always has been, always will be.

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