(Las Vegas) “Who’s tired of hearing about the proposed DOL fiduciary standard?”
All hands in a packed room at the 2016 LIMRA Life Insurance Conference were raised. And this is how the session on the proposed DOL rule began.
On hand to speak about the regulations were:
- Mark Smith, partner at Sutherland Asbill & Brennan LLP
- Jill Peckingham, senior manager at EY
- Marcel Weiland, director of enterprise solutions at Riskalyze
For the speakers, the second order of business was to remind attendees that, as of tomorrow, we will no longer be talking about a “proposal,” but about a final rule. “We still don’t know for sure when the text of the rule will be made available,” said Smith. “All indications are this may well be the last conversation about a ‘proposed’ rule before we have a final rule,” which is slated to be announced by the Department of Labor tomorrow afternoon.
Why does this rule matter?
“The retirement market is a hugely consequential financial market in this country,” said Smith. “Roughly $19 trillion dollars are potentially at play.”
If advisors are acting as a fiduciary, providing investment advice to either an ERISA plan or an IRA — that is prohibited under federal law if the advice given results in differing compensation, or differing revenue to either the advisor or an affiliate.
“If you are a commission-based salesperson and you’re a fiduciary, that’s a prohibited transaction,” Smith explained. “If you give advice that leads to the purchase of a proprietary product, that’s a prohibited transaction. Also, you don’t get a pass simply by giving disclosure on a conflict of interest. You only get a pass if the federal government has given you an exemption.”
Peckingham noted that what EY has been hearing from clients for nearly one-and-a-half years is mostly hypothetical discussion. However, they have witnessed companies divesting themselves of business that may be impacted by the upcoming ruling.
“From a Riskalyze perspective, the firms we’ve seen have done as much as they can to prepare [for the ruling],” Weiland said. “I think we’re going to shift gears very quickly. Firms are ready to go through the final planning stages. They’re ready to build a system that’s going to be compliant with the new regulations.”
Bringing technology up to speed is by far the only thing that is most worrisome to companies and advisors within the industry. Another major concern: Prior advice that’s been given to clients.