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February 17, 2021 at 04:27 PM
Advisors, take heed: The recently approved Trump Labor Department fiduciary prohibited transaction exemption, which took effect Tuesday, treats rollovers as fiduciary advice.
“People have made the argument that rollovers cannot be fiduciary advice because it’s a one-time recommendation,” Brad Campbell, partner at Faegre Drinker in Washington, said Tuesday on the firm’s webcast, “What Lies Ahead for RIAs: The DOL and SEC Regulatory Landscape.”
The Trump administration guidance that the Biden administration has allowed to stand, at least for now, says “that’s not quite correct,” said Campbell, a former head of Labor’s Employee Benefits Security Administration.
The exemption says: “If you and the participant that you’re recommending rollover to, even though you advised them to do the rollover now, when you entered into that arrangement to give that advice, did both of you intend that you would meet again in the future to give more advice? To actually manage the assets or advise about managing the assets in the IRA?” Campbell relayed.
“If the answer is yes, we both intend to meet in the future, then DOL views it as an anticipated ongoing relationship. In other words, the beginning of an advice relationship that is fiduciary from the initial advice,” Campbell explained.
Another Labor Department example said: “If you’d previously been advising this participant on qualified retirement issues, then this new bit of advice related to the rollover was part of that ongoing relationship and therefore was fiduciary from the beginning,” Campbell said.
