By Jamie Hopkins
The Department of Labor fiduciary rule has already been transforming the financial services industry well before anyone is required to comply with its expanded requirements.
With the rule’s passage came a tidal wave of misconceptions, educated and uneducated guesses as to its future impact, compliance concerns and industry concerns. Companies that want to comply with the rule and operate in the individual retirement account and 401(k) markets will need to have new documents, checklists, policies and procedures in place to monitor their advisors’ investment advice and strategies.
In fact, for any company planning to operate under the Best Interest Contract Exemption (BICE) or the level-fee exception, the Department of Labor advised that the financial institutions should “ensure that their policies and procedures are reasonably and prudently designed to ensure Advisers’ compliance with the Impartial Conduct Standards when recommending them.”
Additionally, the financial service companies “must ensure that advisers are provided with information and training” to properly understand the investment strategies and products used. As such, financial service companies will need to train and make sure their advisors are properly educated on retirement income planning and on what it means to be a fiduciary.
The American College of Financial Services has created a professional standards education course specifically tailored to educate advisors on what it means to be a fiduciary under the Employee Retirement Income Security Act (ERISA) and what the impartial conduct standard means.
The course is designed to help compliance departments manage, train and educate financial advisors and their entire institution on what it means to be a fiduciary and act in accordance with the impartial conduct standard. Individual advisors are able to enroll in the courses today and a number of the leading financial service companies are currently working with The College to incorporate the training and education across their institutions.
According to Dr. Craig Lemoine, one of the professors that was fundamental to the development of the program, “It is crucial for financial service firms to engage in a process to educate and train their advisors on the rule and its implications but, at the same time, companies should be a little fearful of staying too far from the pack when implementing a training or education program.”
Additionally, Lemoine noted that the program’s is to provide financial advisors with an understanding of the requirements in ERISA for a fiduciary as well as explain the new DOL rule and its requirements.
While The American College’s professional standards course is up and running to help companies get a grasp on the initial compliance and training issues, the education and training requirements will not stop after everyone understands what it means to act as a fiduciary under the new rule.
As the industry moves forward, consistent fiduciary training and education will be important for the industry to maintain quality control and train advisors. Designations and education programs will become increasingly important to help companies distinguish themselves now that the fiduciary requirement will be more standard across the industry. Education and training also will help set advisors apart from the growing challenges of robo-advisors.
Jamie Hopkins is co-director of The American College New York Life Center for Retirement Income. He may be contacted at [email protected].