In a wide-ranging webinar, two senior vice presidents at Envestnet laid out several steps advisors can take to comply with the new Department of Labor fiduciary rule. The presenters, Lincoln Ross and Jim Patrick, noted that the recommendations are part of an ongoing process that will evolve over time as the DOL itself releases more FAQs and other communications about the rule, which runs over 1,000 pages.
Here are some of the highlights of the Envestnet webinar along with our followup afterward:
Implementation of the DOL rule will be gradual. Between now and April 10, 2017, it’s business as usual, followed by a transition period that ends Jan. 1, 2018.
During the transition period, advisors can use an interim BICE (best interest contract exemption) when investing client funds in a commission product like a variable annuity. That would require a written statement of the fiduciary status of the advisor and identification of a compliance officer overseeing BIC exemptions.
It could be followed by what Envestnet calls a “level fee fiduciary BIC,” whereby the account becomes fee-based, if it’s not already. There would be no variable compensation that results in a conflict. Once that’s signed, no other BICE would be required in the future.
For other advisors not operating as a level fee fiduciary, a full-blown BIC would be required as of Jan. 1, 2018, for the sale of any product that involves variable compensation for the advisor. It would commit the advisor to being a fiduciary, disclose general compensation and, if requested, compensation for sales of specific products.
There are still questions about which products requires BIC and when, but the DOL could clarify that through additional FAQs or other communications, says Ross.
In the meantime, Envestnet will be supporting advisors and institutions through this transition period and holding more webinars, says Ross, Envestnet’s head of product strategy and marketing.
“There’s a lot to capture here,” said Patrick, head of advisor services.