When the DOL Fiduciary Rule became law several weeks ago, commission-based advisor/client relationships were effectively transformed.
Because the rule and its potential ramifications have been widely reported and discussed in the media — and within organizations – for months preceding the April 6 enactment, advisors weren’t exactly caught off guard. But many advisors may still struggle with new practical considerations.
Going forward, advisors must qualify for a best-interest contract exemption (BICE) in order to receive commissions on annuity sales. To do so, they must ensure they’re providing advice that’s in the client’s best interest, and advisory firms must have practices in place to eliminate potential conflicts of interest.
Erin Sweeney, counsel at Washington, DC-based Miller & Chevalier and former DOL senior benefit law specialist, said one of the most helpful parts of the final ruling is that commission-based products are eligible for the BICE exemption. Initially, the DOL proposal had many advisors worried that a commission-based program would never comply with BICE, and that they would instead be limited to providing fee-based programs.
“There are some helpful pieces in the final regulation, along with an understanding and appreciation by the DOL that complying with the rule is not one-size-fits-all and the rule doesn’t intend to drive everyone to a fee-based model,” Sweeney explained.