DOL Fiduciary Guidance Coming Soon

The Department of Labor plans to “push out guidance fairly shortly” to address questions about compliance with Labor’s fiduciary rule, Timothy Hauser, chief operating officer of DOL’s Employee Benefits Security Administration, said Monday.

Speaking at the Investment Management Consultants Association’s Focus on Fiduciary event in Washington, Hauser noted the technical corrections that were issued in early July regarding the fiduciary rule, adding that there will be “more guidance to follow.”

Hauser told reporters after his remarks that while DOL has “drafted” guidance in question-and-answer form and is “working on” such guidance, he couldn’t provide a timeline on when it would be released. The biggest concern DOL has heard from advisors thus far is “are they going to change their incentive structures. We have some people coming in to talk to us about some specificity on that,” he said.

Other questions have focused on firms’ “training programs” as well as the best interest contract exemption, he added.

Hauser also warned attendees that while “work continues on the rule,” with more guidance forthcoming, the rule is “final; this is going to be law.” He reiterated that firms “should not be spending enormous amounts of money on compliance systems if you don’t know how to comply” with the rule. “We very much encourage firms to come and talk to us and raise issues. …You shouldn’t be afraid to ask the question and get the answer. Better to get the answer than spend the money and find out we’re not happy.”

Ray Ferrara, the former chairman of the Certified Financial Planner Board of Standards who’s chairman and CEO of dually registered ProVise Management Group in Clearwater, Florida, noted on a panel discussion at the event that he expects his firm to shell out “less than $10,000 in our hard costs” to comply with the fiduciary rule, but didn’t anticipate “any significant ongoing [compliance] costs.”

But David Eisen, senior vice president of investments in UBS’ Philadelphia office, said “the cost [of complying with the rule] to our firm will be pretty significant.”

Hauser emphasized during his remarks that the rule’s “definition turns on whether you made a recommendation. It’s not just the description of the attributes of an investment.”

The technical clarifications DOL issued in early July addressed whether insurance companies can use the best interest contract exemption as well as principal transaction exemption clarifications.

Hauser told reporters Monday that there are no further ”technical corrections planned at the moment.”

One attendee asked Hauser if financial planning crosses the line into advice when an advisor tells a client to roll over assets but doesn’t recommend a specific investment.

“If you recommend that someone roll their money out of a plan, that’s going to count as fiduciary advice,” Hauser replied. “You do need to be prudent in making that recommendation.”

Another question was whether an advisor is a fiduciary if she recommends that assets remain in a plan.