Dear Clients and Friends:
The U.S. Department of Labor’s new fiduciary “Conflict of Interest Rule” applicability date of April 10, 2017, is fast approaching and the implications of being a fiduciary (whether you have always been one or are going to become one for the first time) are significant. As a fiduciary investment adviser, in order to even begin preparing for the application of the new Conflict of Interest Rule, you need a clear and concrete understanding of:
- Your client. Is it a Plan subject to Title I of ERISA? Is it an IRA or other qualified retirement vehicle not subject to Title I of ERISA? Is it a Coverdell Education Account or Heath Savings Account? Is it another type of Retail Investor?
- Your services. Are you providing discretionary investment management (which is not eligible for Best Interest Contract Exemption (“BICE”) relief) or non-discretionary investment advice (which is eligible for BICE relief)? Have you considered all offerings on both the brokerage and registered investment adviser platform?
- Your compensation. Do you receive “level” compensation or “transaction-based” compensation? Have you clearly identified and considered ALL sources of third party payments and internal mark-ups to identify potential sources of variable compensation?
- Your products. Do you recommend any insurance product or affiliated/proprietary product for investment?
The answers to these questions will guide you and enable an informed decision on what exemptive relief, if any, is needed by April 10, 2017. Are you going to use the Best Interest Contract Exemption, Prohibited Transaction Exemption 84-24, Prohibited Transaction Exemption 86-128, Level Fee Exemption, Grandfathering, or Transition Exemption, to name a few? Are you going to be on a level fee platform so as not to violate the prohibited transaction rules of ERISA, and not in need of exemptive relief? What about BIC for the Day….does that apply?
Most financial institutions have determined (sometimes reluctantly) that some action for DOL fiduciary preparedness is necessary in order to be properly poised for the April 10, 2017 applicability date, despite the uncertainty on the long-term status of the new Conflict of Interest Rule.
The Wagner Law Group’s staff of nationally recognized attorneys remains at the ready to advise you on these crucial matters. Please do not hesitate to contact us in order to make sure that you are properly prepared for the implementation of the new DOL Conflict of Interest Rule on April 10, 2017.