The Department of Labor is on the verge of implementing its rule redefining fiduciary on retirement accounts – are advisors and firms prepared for this new ERISA rule?
While there are many outstanding questions about what the final rule will actually say, a big concern seems to be the amount of time given for advisors and firms to implement and comply with the new standard.
An implementation period of at least eight months is expected, although it’s unknown if that time frame will change in the official rule.
Robin Traxler, vice president of regulatory affairs & associate general counsel for the Financial Services Institute, thinks the eight-month implementation time frame is “unworkable.”
According to Traxler, FSI’s members are saying they will need three years to comply to the rule. FSI has around 35,000 financial advisor members.
There will be technology changes that firms will need to put into place under the new rule, and often a firm’s IT is budgeted out two or three years in advance, Traxler said.
“Firms need time to budget for changes,” Traxler said during a webcast hosted by our sister site, ThinkAdvisor.
This was one of many concerns that FSI formally submitted to the DOL in a letter, suggesting firms have at least 36 months to implement changes.
American Portfolios Financial Services Inc., who sponsored the webcast, has already done a lot of work in preparation for the impending rule – but a major concern is the time needed to comply, said Keith Kelly, vice president of sales and new business development at American Portfolios.
“Time is going to be the enemy,” Kelly said during the webcast. “Void of more time is what’s going to make it difficult.”
Many in the industry, such as the Financial Planning Coalition, have advocated for a limited extension to the eight-month period of no more than 12 months.
“That would be fantastic, and we know our partners and us would be advocating for that extension,” Kelly said. Adding, “There could be hundreds of thousands or millions of accounts to be converted in that timeline. There’s isn’t enough time in a day.”
For the past year American Portfolios has been working on educating and guiding its advisors on the new rule, and in December it launched a committee with 12 members of its staff specifically focused on the DOL fiduciary rule.
“For past year or longer, while we didn’t take an approach that action needs to be taken immediately, we did prudently guide our advisors that we need to accept that our industry is significantly shifting,” Kelly said.