On April 6, the U.S. Department of Labor unveiled the fiduciary rule that has been six years in the making.
Department of Labor Secretary Thomas Perez said that the new rule ensures that financial advisers will act in the best interest of their clients. Gone is the suitability standard and replacing it is a fiduciary standard.
“A consumer’s best interest must now come before the adviser’s financial interest,” Perez said.
The Financial Planning Association will be there for its members throughout the process of compliance, said FPA President Pamela Sandy, CFP®. Firms are required to comply by Jan. 1, 2018.
“FPA, as your professional home, will be helping you understand the rule and assisting you in adjusting to the impact the rule will have on your clients and your business,” Sandy writes to FPA members.
Members now have access to the organization’s newest Knowledge Circle on Public Policy and Regulation, which is now available to help members navigate the new law and discuss information with peers. The Knowledge Circle will temporarily be headed by FPA Chair Edward W. Gjertsen, II, CFP®.
Perez said the change in regulation is long overdue.
“The regulatory structure that protects people’s investments has not kept up with the changing landscape,” Perez said at a press conference. The rules that were in place were sufficient for days when pensions dominated the retirement field and Leave it to Beaver was popular on television, he added.
But we live in a Modern Family world now, IRAs and 401(k)s rule the roost, and people are losing $17 billion annually in fees for bad products and advice, according to a 2015 White House report.
Perez said the streamlined rule addresses concerns that many opponents had with the first versions of it, which were proposed in 2010, withdrawn, then re-proposed in 2015. The new rule has some flexibility for firms that sell proprietary products, has extended the deadline for compliance four months, and streamlined the mechanics of the contract, among other things.
“Today’s rule ensures that putting clients first is no longer simply a marketing slogan, it’s now the law,” Perez said.
Proponents of the new rule are expecting a fight from the rule’s opponents, New Jersey Senator Cory Booker (D-N.J.) said at the press conference on April 6.
But Senator Elizabeth Warren (D-Mass.) said, “We are not going back. This rule is too important for seniors, it is too critical for workers, and it is one more step to making sure our economy can grow from the middle out, not from the top down.”
Join the discussion on FPA Connect, and see below for a list of helpful links to help you arm yourself with the most current information.
Journal of Financial Planning
Helpful Links for More Information
- Fact sheet: https://www.whitehouse.gov/the-press-office/2016/04/06/fact-sheet-middle-class-economics-strengthening-retirement-security
- FAQ: http://www.dol.gov/protectyoursavings/faqs.htm
- Chart: http://www.dol.gov/ProtectYourSavings/comparison-chart.htm
- DOL Fact sheet: http://www.dol.gov/ProtectYourSavings/FactSheet.htm
- Centralized source for DOL information, videos: Are your retirement savings at risk?