New Department of Labor (DOL) Fiduciary Rule: Embracing New Regulatory Requirements

The US Department of Labor (DOL) released its new fiduciary rule proposal on October 31. InvestorCOM hosted the wealth industry’s trusted experts to share their experience and insights on how the industry can handle new regulatory requirements, including the DOL’s new proposal.

Dawn Thomason, Chief Compliance Officer, USA Financial

This has been going back and forth for quite some time. We’re in that same boat – where we have all our financial advisers comply. Let’s remember that whatever rolls out to them must be practical. They must be able to implement it into what they’re doing, and we took that exact same approach. You can’t tell them to do something one day – because we think it might be a rule later and then take it away – because we haven’t heard anything for a while.

I think it was in 2016 that we rolled out the beginning stages in more of a ‘Narrative Approach’, where we did address a lot of similar stuff. Since then, we have just been looking to refine it and make it easier to implement – but we didn’t ever go back and forth in terms of making requirements – retracting them – making requirements – and retracting them: because not only do we have to change or train the financial advisers, but they also have to train their staff and so that’s really difficult to do.

Ed Wegener, Managing Director, Oyster Consulting LLC

Both because of the uncertainty as well as the SEC’s requirements, we advise firms not to make any changes, and I would expect that guidance would be the same between now and when this proposal is ultimately effective: If you’re a broker-dealer and or investment advisor, you continue on the same path that you were doing, provided it was a good path, and implement the prohibited transaction exemptions (PTE) as you had intended while looking to see if there’s any impactful changes and making sure that you incorporate those by the time they’re effective.

Fred Reish, Partner, Faegre Drinker

After the Florida roll-back, my clients fell into three categories:

  1. Bigger broker-dealers did exactly as Ed Wegner mentioned – because they’d say, “We can’t all be fiduciaries because we have thousands of advisers complying with this today; then tomorrow they don’t?”
  2. A few, in case of a rollover mistake, would correct it but not do the last part in the PTE 2020-02, which is to self-report to the Department of Labor, because they didn’t think it was required anymore.
  3. Some of the smaller clients, I think mistakenly, said, “Oh, this whole thing with PTE 2020-02 went away with the Florida ruling, and we don’t have to worry about it anymore,” and just stopped complying. I think that was a real mistake; I had advised them otherwise.

The conversation was part of a webinar that covered other aspects of the new DOL fiduciary rule and coping with it as an industry. Watch the webinar.