The scope of the rule is quite broad, but the DOL has created several exclusions from its new definition of “investment advice.”
So long as communications or transactions fall under one of the excluded categories, they will not be deemed to be fiduciary advice, even if those communications or transactions involve providing investment-related recommendations to retirement clients.
Of course, the parties involved will not be excluded from the “fiduciary” definition if they affirmatively acknowledge their status as fiduciary advisors when offering their incidental advice.
Here, however, is a list of seven exclusions that could apply when parties avoid accepting fiduciary status.
1. Platform Providers
The exclusion applies to providers of investment platforms for defined contribution plans with participant-directed investments, such as 401(k) recordkeepers.
As long as the applicable conditions are met, the platform provider will be able to market various investment funds from its platform, which in turn may be offered as investment options to plan participants.
The provider will need to market these investments without regard to the individualized needs of the particular plan or its participants. The provider will also need to disclose in writing that it is not undertaking to provide impartial fiduciary advice.
2. Investment Education
The investment education exclusion under the DOL’s new rule is based on the existing safe harbor for non-fiduciary investment education under DOL Interpretive Bulletin 96-1.
Consistent with that safe harbor, there are four categories of investment-related guidance that may be provided to retirement clients without triggering fiduciary status. They include:
- plan information,
- general financial, investment and retirement information,
- asset allocation models, and
- interactive investment materials such as retirement calculators and questionnaires.
3. General Communications
Certain kinds of “general communications” are excluded from investment “recommendations” so long as a reasonable person would not view such communication as an investment recommendation.
Examples include general circulation newsletters as well as commentary in publicly broadcast talk shows. It also includes widely attended speeches and conferences, as well as research or news reports prepared for general distribution.
Also covered by this exclusion are general market data, performance reports and prospectuses for investment products.
4. Sales to Institutional Fiduciaries
Under the new DOL rule, there is an exclusion from the fiduciary definition for sellers of investment products to institutional fiduciary clients with authority over plan or IRA assets.