About the DOL Conflict of Interest (Fiduciary) Rule

What is it?

The U.S. Department of Labor Fiduciary Rule ("the Rule") has forced changes in the way the financial industry delivers retirement-savings advice, and it expands the definition of an investment advice fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA). The rule also has changed the exemptions that until now were listed as part of the prohibited transaction exemptions for investment activities.

What does it mean?

The Rule requires that financial professionals act in the best interest of their clients when providing investment guidance. Before this Rule, a financial professional was required to make recommendations that were deemed to be “suitable” for the consumer, which is a lower standard than the "best interest" requirement under the new Rule.  One of the primary drivers for the new Rule, as stated by industry proponents, is the suggestion that financial professionals today often recommend insurance and investment products  that involve high fees and which pay the professional high commissions  at the clients' expense.

Who does it impact?

The rule, which is designed to benefit purchasers of products, could have a significant down-side impact on broker-dealers, investment advisers, insurance agents, banks, insurance carriers , plan consultants and other financial institutions who would be designated as fiduciaries to ERISA plans and individual retirement accounts. These financial professionals must either avoid receiving payments that create conflicts of interest or comply with the exemptions contained in the final rules. 

Please also view our DOL Rule Documents and Related Links web pages for additional information about the Rule.

At Summit Compliance Group, we are keeping abreast of the interpretations and implications of the Rule, which has now partially taken effect (i.e., the "Impartial Conduct Standards"),and with full implementation delayed until July 1, 2019. We offer a variety of compliance consulting and outsourcing services to help our clients comply with the Rule. Contact us to learn how we can help you.