6 actions to take during the Department of Labor’s fiduciary rule delay

Perhaps you hoped and thought that, by now, it would be clear what would happen and when regarding the U.S. Department of Labor’s fiduciary rule — created with the intent of ensuring that advisors’ recommendations, primarily pertaining to retirement, are made in the best interest of their clients. After all, the long-developing regulations originally were meant to become applicable April 10.

Well, as you probably know, nothing is certain, and the situation almost progressively becomes more confusing, not less. The delayed rule may, in fact, partially go into effect on June 9 (with the rest of the terms in place on January 1, 2018). Or it may experience another delay/adjustment as the department fulfills the White House request to determine if the regulation brings with it increased costs, market disruption, increased litigation, reduced access to advice and/or run contrary to the Trump administration’s policies.

Add in the possibility of litigation against the department for delaying the rule — supporters say the delay harms the public — and it’s not hard to see why even experts hesitate to make any definitive predictions.

NAIFA director of federal relations Judi Carsrud has been watching the rule since 2010 and been involved in discussions with White House officials and members of the DOL as the regulation took shape. (For the record, she hopes for more delays.) No matter what happens with the rule moving forward, she said, what remains clear is that advisors, many of whom have already been moving to a fee-based practice and all of whom theoretically already work under an impartial conduct standard and receive reasonable compensation, should not wait to do the following:

1. Pay attention to what your broker dealer or financial institution is telling you. Their requirements and how they interpret the rule will be what you are subject to in the end, regardless of what the rule says.
2. Know which clients in your database are impacted by the rule, and what kind of sales and marketing you do that are impacted as well.
3. Understand what disclosures and communications have to happen with your clients and when, at the latest, that communication has to occur.
4.  Be clear about your compensation with clients and ensure they understand their choices.
5.  Keep clear records, documenting why your recommendations are made.
6. Educate your staff — they need to know what you know and under what circumstances all of the regulations will apply.

The situation is so volatile, Carsrud said, that she is concerned about the effect on her upcoming presentation about the topic June 5 at the MDRT Annual Meeting. If nothing is determined before then, she’ll have to make caveats about not knowing which part of the rule, if any, will be applying the following week.

With all these disclaimers, though, she said that following the steps above will put advisors in the right place: “As long as you do that, you’re in a good position no matter what comes out of Washington.”

Plus:

• Learn more about preparing for the rule with this regulatory change checklist
• Hear how advisors from the U.S., U.K. and Australia adapt to regulation in episodes one, two and three of our DOL-related podcast series

Written by Matt Pais, MDRT Content Specialist