The Department of Labor (DOL) recently issued a new ruling. This change will provide retirement investment clients with unprecedented protection by mandating that all agents who operate in the retirement investment arena adhere to a fiduciary standard, meaning they must act in a way that puts the client’s best interest ahead of their own interests.
Currently, Registered Investment Advisors (RIAs) and their Investment Advisor Representatives (IARs) are obligated by the fiduciary standard. With the new ruling, all who give retirement investment advice will be required to do what is right for the client; allowing the investor to walk away with some assurances that the people helping to manage their retirement savings will be acting in their best interest.
The fundamental threshold for compliance with the fiduciary standard is whether or not a recommendation occurred. The more individually specific the advice, the more likely the communication will be viewed as a recommendation. Basic education about retirement savings, presentations at conferences and general marketing materials are not considered to be recommendations. In addition, an exception to the rule recognizes that internal employees, such as members of a company’s human resources department, routinely develop reports and recommendations for investment committees and other named fiduciaries of the sponsors’ plans, without acting as paid fiduciary advisers.”
The final rule and exemptions adopt a “phased” implementation approach. One year after the rule’s publication, in April 2017, the “broader definition of fiduciary will take effect, but to take advantage of the BIC exemption, firms will only be required to comply with more limited conditions, including acknowledging their fiduciary status, adhering to the best interest standard, and making basic disclosures of conflicts of interest,” DOL states in a fact sheet released recently detailing some of the final rule’s changes. The other requirements of the exemption will only go into full effect on Jan. 1, 2018.
Some key items to consider are:
If advice is provided to an Individual Retirement Account (IRA) investor or a non-ERISA plan, the Financial Institution must set for the standards of fiduciary conduct and fair dealing in an enforceable contract with the investor. Clients will sign a contract with the Financial Institution (firm) and will receive notice of their rights. Plan participants receiving advice about investments in employer-sponsored plans will also receive the same general protections but will not be required to sign a contract.
As a Registered Investment Advisor, our advisors have been operating under the fiduciary standard, but will also be responsible for complying with the new standards adopted by the Department of Labor.
“BerganKDV Wealth Management is an independent advisory firm, meaning we have the flexibility to look at all investment options to find the best match for our clients” said Dave Hinnenkamp, Partner in charge of BerganKDV Wealth Management. “We follow a strict code of ethics when we approach investment management and advice. We welcome the ruling as it raises the bar for the retirement planning industry as a whole.”
Learn more about the conflict of interest rule by visiting the DOL website.
Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, LLC, an SEC Registered Investment Advisor. Securities offered through ValMark Securities, Inc. Member FINRA, SIPC – 130 Springside Drive Suite 300 · Akron, Ohio 44333-2431 · 1-800-765-5201 BerganKDV Wealth Management, LLC, is a separate entity from ValMark Securities, Inc. and ValMark Advisers, Inc.