The Department of Labor (DOL) has released the final version of its controversial fiduciary rule, portions of which will be effective by September 23. The rule expands the definition of when an individual providing investment advice becomes a fiduciary under ERISA and seeks to reduce conflicts of interest. The rule has faced opposition and threats of litigation. Opponents claim that sufficient regulation is currently in place to protect consumers, and the rule will dissuade investment advisors from providing much-needed advice.
The rule expands fiduciary status to include rollovers to IRAs, annuity sales, and qualified retirement plan investment menu design. One of the most watched and most significant changes was to expand fiduciary coverage to one-time advice, such as a recommendation to move assets from a retirement plan to an IRA. The rule also seeks to provide fiduciary coverage regardless of the recommended investment product to address the current system where different standards can apply.
The new rule states that a financial services provider serves as an ERISA fiduciary if:
- The provider makes an investment recommendation
- The recommendation is provided for a fee or other compensation, and
- The financial services provider holds itself out as a trusted advisor by
- Stating that it is acting as an ERISA fiduciary, or
- Making the recommendation in a way that a reasonable investor would believe the recommendations are being made in the investor’s best interest
Multnomah Group will continue to monitor and report on developments related to this rule. Opposition was such that we expect to see legislation or litigation specifically targeting the rule.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.