DOL Gives Industry More Time To Comply With Fiduciary Rule

In its final fiduciary rule, the Department of Labor granted the financial services industry more time to comply with the regulation than was previously proposed.

DOL included a phased implementation approach in its final regulation.  The rule requires firms to comply with the broader fiduciary definition by April 6, 2017, or one year following DOL’s publication of the final regulation.  Thereafter, the department will require full compliance with the Best Interest Contract Exemption and Prohibited Transactions Exemption by January 1, 2018.
Some members of the financial services industry are pleased with the extended timeline for compliance compared with the proposed regulation.  Robert Gerstemeier of Gerstemeier Financial Group, a fee-only investment firm, said he was happy about the additional time given to implement the rule.  “The rule will change the entire structure of our industry.  It would be too difficult to comply by next January,” he said.

The department set a longer implementation timeline than originally proposed because of rule’s importance to consumer protection and the amount of time needed for plans and advisors to transition from a non-fiduciary status to a fiduciary one, DOL officials said.

DOL will use the 20 months until full implementation to aid investment advisors in complying with the rule.  To that end, the department will issue guidance and assistance documents to support the industry as it changes the way it conducts business.

Members of the industry said they will use this time to adjust to the new requirements.  At a minimum, firms will need to change the contracts they use with clients.  Gerstemeier stated that accommodating a large amount of 401(k)-to-IRA rollover transactions will be “front and center.”

But as Paul Dougherty, the president-elect of the National Association of Insurance and Financial Advisors stated, although the industry will need to adapt to the new rules, the “trusted and long-standing relationships with our clients won’t change.”

Julie M. Anderson served as an executive in the Obama Administration and at IBM.  She now leads AG Strategy Group, which provides strategy consulting and management training services to government agencies and federal contracting companies. Julie may be contacted at [email protected].

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Julie M. Anderson served as an executive in the Obama Administration and at IBM. She now leads AG Strategy Group, which provides strategy consulting and management training services to government agencies and federal contracting companies. Julie may be contacted at [email protected].