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The New DOL Fiduciary Rule

While there are many items and complexities to the new rule, this article focuses on the basic premise of why the rule was developed and adopted and the effect on the retirement landscape and the players involved.


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The Department of Labor’s Fiduciary Rule became effective on June 9th, 2017, and is in a transition period to take full effect on Jan. 1, 2018. Since the rule was introduced in April of 2015, it has faced debate from both sides of the argument: was it needed or not needed? Now that it is in place and active at least in some capacity, what does it mean to retirement plans, retirement plan sponsors, retirement plan participants, investors and financial advisers?

While there are many items and complexities to the new rule, this article focuses on the basic premise of why the rule was developed and adopted and the effect on the retirement landscape and the players involved.

Why Was the Rule Developed and What Is Its General Premise?

While corporate retirement plans have had a foundation for fiduciary responsibility since 1974 with ERISA, the same hasn’t been true of retirement-based assets in IRAs. The fiduciary standard set forth with ERISA for retirement plans has not been present in IRAs. These accounts have been held to a suitability standard instead. Where the retirement plan fiduciary is to act in the best interest of the plan participants and use due care and due loyalty in the process, the suitability standard suggests that any product or investment can be placed into an IRA if the individual investor can prove to be suitable in qualification for that product or investment. In other words, the financial adviser, registered representative, or agent can simply use a checklist of guidelines for qualification or suitability without acting in the best interest of the individual investor.

How Does the New Rule Affect Corporate Retirement Plans?

While corporate retirement plans have had fiduciary standards and responsibilities since ERISA was passed in 1974, a great deal of time has passed since it was introduced. Several laws and bills have been introduced since the early 2000s when corporate malfeasance seemed to run rampant. While the landscape has been tightened up, the practical application of the rules by the corporate community is still lax overall. It appears that Department of Labor and Internal Revenue Service intervention, along with industry education and lawsuits, are the methods by which enforcement and adherence to the proper standards are applied. This has still been a slow process, and this is where more regulation typically develops.

How Are Retirement Plan Sponsors (Plan Fiduciaries) Affected By the New Rule?

One of the major takeaways from this new rule for corporate retirement plan fiduciaries is the continued scrutiny of those service providers, plan parties in interest, and outside advisers hired by plan fiduciaries to aid in the plan’s function and operation. While the government has long suggested that “prudent experts” be hired in these positions, a new emphasis on plan financial advisers being conscious of their role as fiduciaries and outlining their role and services to the plan sponsor, the plan, and the plan participants. Fee-based arrangements that are transparent are replacing imbedded commission compensation in plans. Corporate plan fiduciaries should be very aware of the fees the plan is paying for these services and their providers and be able to benchmark them for reasonableness. Even before the rule went into its transition period, numerous excessive fee lawsuits had been filed nationwide as fee reasonableness is left to be determined by the courts in the absence of the retirement industry stepping up and doing it up to now.

How Are Individual Investors In IRAs Treated Under the New Rule?

One of the most prolific changes that the new rule makes is the change in how individual IRA accounts are to be viewed with the criteria in which they are invested and managed. As previously stated, IRAs have always been monitored in a suitability standard, while corporate retirement plans typically were to follow a fiduciary standard. The new rule looks at the IRA as a retirement account equivalent in many ways to the corporate retirement plan’s participant account and it should be managed and invested with a fiduciary standard as well. This will cause a paradigm shift in the types of investments and their compensation structure that will be offered to IRA accounts in the future. It will also require that a person working in this financial arena be credentialed and qualified differently because of the potential fiduciary responsibility and liability now associated with these accounts that wasn’t universally present prior to the rule.

How Will Things Be Different for Agents, Registered Representatives and Financial Advisers?

Because of the “new” potential increased liability associated with corporate retirement plans and IRAs, many organizations are limiting the number of financial advisers, registered representatives and agents that will be able to continue to work in these areas. While the rules haven’t really changed in regards to the responsibility of a financial adviser with respect to corporate retirement plans, the retirement industry’s adherence to the new fiduciary rule will eliminate some “legacy” arrangements that have been present for years. For example, many providers still sell group annuity contracts as a funding source for retirement plans. While there is nothing inherently wrong with this approach or product (if due diligence is assessed and it is sold properly), the licensing needed to sell this product is limited to a life insurance license in some states, and limited securities licensing in others. The danger in this is that advisers that specialize in areas other than retirement plans are advising retirement plan clients with plan provisions, processes, procedures and investments while possibly not being qualified to do so.

The new standard will be to eliminate these situations in favor of fee-based registered investment adviser level professionals that specialize in the retirement plan area. It will be important for plan sponsors to make sure their advisers meet these new credentials as the fiduciary liability for this falls to them. Most professionals in this area are coming to the table with service agreements that outline their respective services to the plan and the plan sponsor and the fees associated with the services chosen or agreed to.


The new fiduciary rule is effective today in a transition period and fully takes effect on Jan. 1, 2018. It will take time to process and integrate how retirement plans, service providers, plan sponsors, individual investors with IRA accounts and advisers work together. There will be a period of fee and expense volatility in all areas as the retirement area of the financial services industry adjusts to the new rule. It will be very important for retirement plan sponsors and IRA holders to take time to assess their current relationships to make sure they follow proper standards, apply appropriate and reasonable fees for the services rendered, and check the credentials of advisers associated with their programs and accounts.

Plan participants and investors have more information and resources available to them than ever before and are more educated with respect to fees and services than prior generations. There is also more intervention from the DOL and IRS — as well as the legal community — in assessing plan sponsor involvement with respect to retirement plans. A plan fiduciary can’t afford to “fall asleep at the switch” where their retirement plan is concerned in today’s environment. The ramifications of ignorance or apathy where the retirement plan is concerned could be severe.

Individual investors should also be wary of the arrangements and advisers associated with their IRA programs today. While a blanket fiduciary standard is an addition to these accounts, the individual investor doesn’t have a plan sponsor or corporate oversight where their account is concerned. They need to be diligent to oversee their situation on a consistent basis.

***** Charles B. Blanton, Jr., CLU, ChFC, AIF, RF, GFS, is a Managing Partner with ECM Group, LLC ( This document is intended to be informational only. Pensionmark does not render legal, accounting, or tax advice. Please consult the appropriate legal, accounting, or tax adviser if you require such advice. The opinions expressed in this report are subject to change without notice. This material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. The information and statistics in this report are from sources believed to be reliable but are not warranted by Pensionmark Financial Group to be accurate or complete. All publication rights reserved. None of the material in this publication may be reproduced in any form without the express written permission of Pensionmark: Pensionmark® Financial Group, LLC is an investment adviser registered under the Investment Advisers Act of 1940. Financial advisers at Pensionmark® Financial Group, LLC may also be registered representatives of CapFinancial Securities, LLC (member SPIC), which is affiliated with Pensionmark through common ownership.

The views expressed in the article are those of the authors and not necessarily the views of their clients or other attorneys in their firm.

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