Fiduciary Rule Is Coming, and Advisers Aren’t Quite Ready

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Sean Forbes

Nov. 1 — Note to retirement financial advisers: you need to learn now how new fiduciary requirements will impact your business. And you don’t have much time to get ready—the rule takes effect in April 2017.

The trouble is that many advisers are still foggy on the details of the Department of Labor’s fiduciary rule updating the Employee Retirement Income Security Act, also called the conflict-of-interest rule.

Results from Massachusetts bear out evidence that registered investment advisers, who are already considered fiduciaries under the Investment Advisers Act of 1940, aren’t sure how the rule will impact them. Three-quarters of state-registered RIAs, nearly all of whom provide advice on individual retirement accounts, were unsure how the DOL’s rule would affect them, Massachusetts Secretary of the Commonwealth William Galvin found in a survey of RIAs released in late October.

“The survey suggests that Massachusetts-registered investment advisers are unaware that the Fiduciary Rule holds all advisers providing advice to Retirement Investors to an ERISA standard,” Galvin said in the report. “Findings also show that Massachusetts-registered investment advisers are largely unaware of the impact the Fiduciary Rule will have on their obligations to Retirement Investors.”

Hands Up, Hands Down

Matt Matrisian, senior vice president of Concord-Calif.-based AssetMark Inc., found similar results when he surveyed financial advisers.

AssetMark offers a 15-question online tool for advisers to determine whether they’re ready to comply with the rule.

The results haven’t been positive. “Generally speaking, as we would expect, they feel like they’re not ready,” Matrisian told Bloomberg BNA.

At consulting workshops AssetMark has held for advisers, Matrisian has asked whether participants have clients that would be affected by the DOL’s rule. The majority have raised their hands. But when asked how many have taken steps to comply, all hands go down, he said.

Informal guidance that the DOL released Oct. 29 helped some, but advisers are also waiting for guidance from their broker-dealers, Matrisian said.

However, broker-dealers are also still wrangling with how to proceed, such as whether to stop offering commission-based products or to continue offering them, he said.

Matrisian suggested a few items for advisers to consider:

  •  segment their client base;
  •  think about their value proposition; and
  •  for those clients where it makes sense, shift clients over to levelized-fee arrangements.
Matrisian said that among the things that the DOL clarified in its recent guidance is that it won’t delay the rule’s effective date. And that means advisers must “make implementation of the rule their primary focus,” he said.

Tips for Plan Sponsors

Plan sponsors, especially in the small-plan market, also need to educate themselves on what to do under the rule, Cynthia Hayes, president of Cartersville, Ga.-based Oculus Partners LLC, told Bloomberg BNA.

Smaller market plan sponsors are already busy juggling all the responsibilities of running their businesses, so determining the impact of the rule “is probably not at the top of their list to worry about,” Hayes said.

She said the rule should prompt small-plan sponsors to take two major steps:

  •  Take a more active role in monitoring the service provider’s fiduciary status.
  •  Demonstrate more deliberate oversight of any other plan fiduciaries, as well as more comprehensive oversight of providers who are insisting that they aren’t fiduciaries.

To contact the reporter on this story: Sean Forbes in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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