New Fiduciary Rule. Ready, Set...Go!

Buckle up! The new fiduciary rule is here.


No doubt you have heard about the new "fiduciary rule" which will require many investment advisors who traditionally were not required to serve in a fiduciary capacity to raise their standard of care.  After going through some scrutiny under the new administration, the new fiduciary rule from the U.S. Department of Labor (DOL) is set to go into effect tomorrow.  While a transition period is in place until full compliance is required on January 1, 2018, now is the time for fiduciaries to take action. 


What will the rule mean for 401(k) plan sponsors?

Our "Fiduciary Fuss" blog post provides some background on the evolution of the new rule.  But there are some additional pointers for plan sponsors to consider.  The big change now is that some service providers who weren't fiduciaries before may become fiduciaries under the new rule, even though they haven't changed what they do.  These service providers (recordkeepers, consultants, brokers and investment advisors) will now be required to act in the client's best interest when providing investment advice for a fee (Fiducia Group has always put our client's best interests first through action and contractually). 

The new fiduciary rule also defines fiduciary advice more broadly, to include any "investment advice" or "recommendation" given to an employee benefit plan or an IRA.  Some communications will also be considered fiduciary advice.  So, plan sponsors will need to understand what constitutes "investment advice" and what service providers are doing that may fall under that definition.  For example, the change will likely require plan sponsors to take a fresh look at all communications from recordkeepers, call centers, rollover providers and investment advisors.

Under the new fiduciary rule, fees for investment advice must be reasonable and not "conflicted".  That means your investment advisor is obligated to recommend investments based on the client's best interest, rather than investments that will pay the advisor the most.  The fee structures related to asset management, commissions and certain services may change.  Unless an exemption is available, a fiduciary can't receive compensation, including a wide range of direct and indirect compensation, such as commissions and other sales-related revenues.  If your arrangement is "bundled" and you're not sure who is being paid what...this should be a big area of emphasis.  


What are your next steps as a plan fiduciary?

As a plan sponsor you need to understand the new fiduciary rule and start incorporating any necessary changes into your fiduciary process.  A good start would be to review and understand the following:

  • All service agreements for scope of services
  • Fiduciary status of service providers under the new DOL rule
  • The reasonableness of fees with service providers
  • Conflicts of interest with regard to compensation and advice
  • Whether investment information and tools are considered education or advice

The new fiduciary rule has placed a renewed focus on fiduciary status and responsibility.  It's a good time for you to refresh your understanding of your own fiduciary status and responsibilities as well as those of your service providers.  The goal is to be confident that all parties are working in the plans' and participants' best interests.  For our clients, we have you covered!  If you are not a client, we are happy to help...


CARES Act – Plan Changes for COVID-19 Relief
The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), became law today after...
Addressing Participant Concerns on Stock Market Volatility
Yesterday, March 16th, was the Dow Jones Industrial average’s third-worst day in its history. Plan...

Get critical updates 
& expert info sent direct to your inbox.

Sign Up Now!


Enter Email Address