On Sept. 19, 2011, the Department of Labor (DOL) withdrew proposed regulations that would have updated and expanded the definition of advisors who are considered fiduciaries to a retirement plan.
At first blush, this withdrawal may seem like relief to advisors who do not want fiduciary responsibility or whose broker-dealers prohibit them from accepting fiduciary status. A word of caution is in order, however. Not only does the DOL intend to repropose the regulations in mid-2012, the number of advisors who accept fiduciary responsibility to gain market share has increased. Advisors who fail to adapt to this reality may lose traction in the marketplace.
The marketplace now offers extensive fiduciary solutions to advisors. Investment organizations, along with many RIA firms, offer to assume fiduciary status (for a fee) so the advisor can be freed up for other functions. These companies provide services such as specific investment menus for employers and managed account solutions to participants, where they make specific allocation recommendations based on participant data.
Advisors who partner with companies that offer these solutions have made fiduciary responsibility a major discussion item with employers. This allows partnering advisors to demonstrate their value and differentiate themselves from those in the market who prefer not to assume fiduciary responsibility.
These advisors look at the delay as a non-event, as they are already gaining an edge in the market by providing a fiduciary solution.
Those advisors who do not want to be considered a fiduciary and who do not offer employers solutions to mitigate their responsibility, may increasingly find themselves on the outside looking in when employers make their ultimate decision in selecting an advisor.