Final Version of Fiduciary Rule Send to White House; Broker-Dealers Prepare


The Department of Labor on Thursday sent the White House its final version of a proposed fiduciary rule that would raise standards for investment advice related to retirement accounts.

The rule, which is expected to be OK’d, poses new costs and complexities to broker-dealers as it raises the bar for industry transparency.

Details of the rule, from InvestmentNews:

The measure includes a legally binding requirement for brokers to act in the best interests of their clients and mandates a long list of fee disclosures. Right now, brokers need only make sure the investments they recommend are suitable for their clients.


Under the measure, advisers must sign a so-called best-interest-contract exemption, a legally binding document that requires them to act in their clients’ best interests, in order to accept commissions or third-party payments for investment products.

Instead of dealing with the contract, some independent advisers are abandoning products with varying adviser payments, such as variable annuities, and embracing products with level compensation.

According to Financial Advisor magazine, the approval of the rule is nearly certain:

The OMB has 90 days to accept or reject the rule. But considering that the proposal is viewed as a legacy accomplishment for President Obama, its approval is almost certain.

Department of Labor spokesperson Mike Trupo said he could not estimate when the final version of the extensive conflict of interest regulations for pension plan advisors would be made public and official by the agency.

The action by the DOL makes it inevitable that a final rule will be out by the end of the year, said Investment Adviser Association lobbyist Neil Simon.

The final text of the rule isn’t yet available.


Photo by Tom Woodward via Flickr CC License

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