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October 24, 2016 at 08:00 PM
As the Department of Labor begins to roll out guidance this fall on compliance with its fiduciary rule for retirement accounts, advisors and broker-dealers should not count on major revisions or reversals that will substantially ease compliance with the massive rule.
This advice was offered by attorneys during an October webcast that I conducted for ThinkAdvisor.com.
In the face of the impending litigation against the rule, Labor “will be particularly sensitive to reversing course in any way,” noted Josh Waldbeser, associate at Drinker Biddle & Reath. DOL “will be sensitive to changing the meaning of the regulation” through frequently-asked-questions (FAQs).
[Ed. Note: The DOL released its first round of FAQs on Oct. 27, with more expected in the coming months. ]
As it stands now, six lawsuits have been filed against DOL’s rule, with rulings being awaited in Washington and Kansas. Oral arguments in the three cases brought in Texas — which have been consolidated — are set to be heard on Nov. 17.
As the rule’s April 10, 2017, compliance date draws closer, advisors and broker-dealers are in various compliance stages, Allison Wielobob, counsel with Sutherland Asbill & Brennan, noted during the webcast. She said that while this should be expected, advisors and broker-dealers shouldn’t dawdle.
While rulings have yet to be rendered in the suit brought by the National Association of Fixed Annuities in Washington and the Market Synergy case in Kansas, and with the impending April 10 compliance date, “the courts have been made aware that this [fiduciary rule] is a real-world kind of [regulation], and if we’re going to comply […] we have to get going,” Wielobob said on the webcast.
“The responsible business decision [is to] not slow down efforts to comply with the rule” despite the impending litigation.
It does appear that some advisors are trailing behind. At a fall conference held in Washington by the National Association of Personal Financial Advisors, an advisor shouted out during a presentation on compliance with the rule: “What’s the best interest contract exemption?”
The question, while likely on the minds of other attendees, was met with some gasps and sighs from audience members.
Thomas Clark, counsel with The Wagner Law Group, which specializes in ERISA and employee benefits, who conducted that NAPFA session, conceded to the group of fee-only advisors that even after being immersed in the rule since the initial 2010 release, he sometimes feels he has “no familiarity” with it — particularly as further inspection of the final rule reveals new surprises.
A Far-Reaching Rule
DOL’s rule is “going to affect everybody in this room,” Clark told the NAPFA attendees, adding that it’s hard to discern precisely how each firm will be impacted.
When the final rule was released in April, he continued, “the initial reaction from us was, ‘This is really good for those folks who’ve been doing it right all along — a conflict-free compensation structure.’”
