While it was anticipated that the Department of Labor (DOL) fiduciary rule could hinder the availability of financial advice for small business clients, major investment firms have recently taken steps to ensure that exactly the opposite is true. Despite the current delayed applicability status of the fiduciary rule, firms have begun rolling out products aimed at complying with the rule or its successor—highlighting the fact that fiduciary awareness is likely here to stay.
The most recent lineup consists of products and processes designed to make it easier for advisors to provide guidance to small business owners looking to provide 401(k) retirement planning options. This turn represents a significant step toward increased availability of retirement planning advice for small business clients regardless of whether or not the fiduciary rule is retained.
The New 401(k) Advisory Platform
The DOL fiduciary rule’s future is uncertain, but major investment firms have been preparing for the April 10 applicability date for months and have now begun to debut the results of those preparations. Some firms, such as Morgan Stanley and Merrill Lynch, have focused on ways to continue to serve the small business 401(k) market in a post-fiduciary environment.
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Morgan Stanley has chosen to partner with a third-party recordkeeping and administrative service provider, but will provide investment advice itself, for retirement plans with under $10 million in investments. As such, the firm itself will assume the fiduciary role, rather than the individual advisors, so that each of its advisors will be able to act in a fiduciary capacity when advising clients with reduced risk.
This design is aimed at ensuring that smaller clients remain able to access needed financial advice. Under their previously existing system, advisors were required to become designated retirement specialists in order to provide fiduciary advice to 401(k) clients.
Like Morgan Stanley, Merrill Lynch provides advisors with the option of receiving a special designation to provide fiduciary advice to clients seeking retirement planning options. Under Merrill Lynch’s newly designed system, advisors will still be required to obtain this designation, but will become eligible once the advisor advises on $30 million in retirement plan assets, as opposed to the previously applicable $100 million limit.