Category: Registered Investment Advisers


Interesting Angles on the DOL’s Fiduciary Rule #23

Posted on October 11, 2016, by Fred Reish in DOL Activity, fiduciary, prohibited transaction, prudent, Registered Investment Advisers, RIA. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #23

This is my twenty-third article about interesting observations concerning the fiduciary rule and exemptions.

When the definition of fiduciary advice is expanded on April 10, 2017, the investment and insurance recommendations of a much larger group of advisers will be classified as fiduciary advice and will, as a result, increase the focus on financial conflicts of interest (which ERISA and the Internal Revenue Code refer to as “prohibited transactions,” or PTs). My suspicion is that, for most ERISA retirement plans, there will not be a great impact on advisers—because, to a large degree, advisers to retirement plans already are acknowledged fiduciaries. (To be fair, though, there will be some impact . . . particularly on smaller plans, where some insurance companies and broker-dealers have, in the past, taken the position that their advisers are not fiduciaries. Nonetheless, based on my recent … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #1

Posted on April 19, 2016, by Fred Reish in Broker-Dealers, DOL Activity, fiduciary, prudent, Registered Investment Advisers, RIA. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #1

While you have probably read articles that summarize the DOL’s final fiduciary rule and exemptions—and perhaps even articles that discuss specific aspects of the rules, there are a number of interesting observations “hidden” in the preambles to the regulation and exemptions.

In many cases, those comments are so focused on limited issues or complex that they are beyond the scope of the initial articles, speeches and webcasts. As a result, I will be writing several articles about those “nuggets.” This is the first of those articles.

In the preamble to the Best Interest Contract Exemption (BICE), the DOL noted that a fiduciary adviser and his or her financial institution (e.g., RIA firm or broker-dealer) could contractually limit the duty to monitor. But then the DOL went on to say:

“Further, when determining the extent of the monitoring to be provided, as disclosed in … Read More »


Investment Advice to Plans Under the DOL’s Fiduciary Rules

Posted on April 4, 2016, by Fred Reish in Broker-Dealers, DOL Activity, Registered Investment Advisers. Comments Off on Investment Advice to Plans Under the DOL’s Fiduciary Rules

As I work with broker-dealers and RIA firms, certain patterns are developing in their efforts to satisfy the requirements of the DOL’s fiduciary rule and the exemptions.

This article looks at some of those “solutions” and comments on the areas where there is some agreement . . . or at least a majority opinion.

The DOL’s rule will, when finalized, regulate investment advice to plans and participants, investment advice to IRAs, and recommendations about distributions from plans and IRAs.

In this post, I look at the decision being made about advice to plans.

Interestingly, it appears that the changes will impact plans much less than IRAs and rollovers. The plan solutions fall into two categories. The first is that RIAs and broker-dealers will provide level-fee investment advice to plans. In some of those cases, a broker-dealer may need to act under its RIA registration. … Read More »


The Year of the Fiduciary Rule

Posted on January 7, 2016, by Fred Reish in Broker-Dealers, DOL Activity, fiduciary, Registered Investment Advisers, RIA. Comments Off on The Year of the Fiduciary Rule

2016 promises to be the year of the fiduciary . . . the fiduciary rule, that is.

It now seems certain that we will have a final fiduciary rule in effect by the end of 2016.

What will that mean? It will re-write the rules for investment advice and sales to retirement plans and IRAs. The impact will vary, depending upon whether the person making the recommendation is an RIA, a broker-dealer, or an insurance agent or broker.

For example, for RIAs, the greatest impact will be on investment advisers who recommend retirement plan distributions and rollovers and those who receive additional fees (for example, 12b-1 fees) from their IRA investors. On the other hand, advisers of broker-dealers will need to make significant changes in disclosures and compensation practices across the board (that is, for recommendations to plans and IRAs, and recommendations about … Read More »


The Essence of the Fiduciary Proposal . . . for Advisors

Posted on May 7, 2015, by Fred Reish in DOL Activity, fiduciary, Registered Investment Advisers. Comments Off on The Essence of the Fiduciary Proposal . . . for Advisors

By now, you’ve probably read about some of the details of the Department of Labor’s fiduciary proposal. This article isn’t about the details; it’s about the essence. What’s the big picture?

First, the proposal significantly expands the definition of fiduciary advice. As a result, almost every person who makes an investment recommendation to a plan, a participant or an IRA owner will be considered a fiduciary.

For “pure” level-fee advisors (which are typically RIAs), there won’t be any change for their services to plans, participants or IRAs . . . with one exception. The exception is “capturing” rollovers.

For any advisor—broker-dealer, RIA, insurance broker—who makes a recommendation to a participant to take a distribution and roll over, and who will be paid more in the IRA than from the plan, it will be a prohibited transaction. In other words, the recommendation of a … Read More »


Aging Boomers and Rollovers to IRAs

Posted on November 12, 2014, by Fred Reish in DOL Activity, fiduciary, Plan Sponsors, Recordkeeper, Registered Investment Advisers, Service Providers. Comments Off on Aging Boomers and Rollovers to IRAs

As baby boomers approach retirement in a defined contribution world, the regulators are focusing on distributions and rollovers to IRAs. The SEC, FINRA, DOL and GAO have all spoken on the subject. Their conclusion appears to be that plan fiduciaries, advisors and recordkeepers need to reconsider their current practices and, in some cases, change their practices.

Why? The reason is relatively straightforward. As large numbers of 401(k) and 403(b) participants approach retirement, regulators are becoming increasingly aware that they will be moving from a plan environment where they are “bubble wrapped” by plan fiduciaries . . . and have the benefit of being able to select from investments that have been vetted by the fiduciaries and that are, as a result, good quality and relatively low-cost investments. Based on current practices, most of those participants will rollover into IRAs with investments … Read More »


Providing Compliant Services

Posted on August 19, 2014, by Fred Reish in Broker-Dealers, DOL Activity, Registered Investment Advisers, RIA. Comments Off on Providing Compliant Services

The increasing regulation of 401(k) distributions and rollovers to IRAs continues to be a subject of great interest to my clients . . . and a considerable amount of work for me. One of the benefits of concentrated work in that area has been an enhanced appreciation of the difficulty of broker-dealers, provider call centers, and RIAs in providing compliant services . . . from a practical perspective.

For example, viewed academically, it is possible to put together a compliant rollover program under FINRA’s guidance in Regulatory Notice 13-45. At the least, that would involve written materials and discussions about the seven factors listed in the guidance. The written materials would be provided to participants to both educate them and to support compliance and supervision. The conversations would be structured to provide a reasonable basis for developing a suitable recommendation, based … Read More »


Advisory Opinion 2013-03A

Posted on May 28, 2014, by Fred Reish in 408(b)(2), DOL Activity, fiduciary, prudent, Recordkeeper, Registered Investment Advisers, RIA. Comments Off on Advisory Opinion 2013-03A

In Advisory Opinion 2013-03A, the Department of Labor said: “This letter also does not address any fiduciary issues that may arise from the allocation of revenue sharing among plan expenses or individual participant accounts . . .”

In effect, the DOL was saying that it has not issued any guidance—and is not prepared to issue guidance—concerning the allocation of revenue sharing. That is a reminder that there isn’t any explicit guidance on how to allocate revenue sharing. As a result, fiduciaries need to engage in a prudent process to make that decision.

In most cases, revenue sharing is used to pay the cost of recordkeeping. In effect, it is arguable that, when the recordkeeper keeps the money, it is a pro rata allocation among the participants’ accounts. That is because the most common way of allocating expenses (for example, recordkeeping or RIA … Read More »


Capturing Rollovers: A Changing Environment

Posted on March 5, 2014, by Fred Reish in DOL Activity, fiduciary, prohibited transaction, Registered Investment Advisers, RIA. Comments Off on Capturing Rollovers: A Changing Environment

Recent developments suggest that FINRA, the SEC and the DOL are working together…or, perhaps, have independently reached the same conclusions.

In the past few months, FINRA has discussed rollover IRAs in five publications. The most important of those being Regulatory Notice 13-45, which creates a fiduciary-like process for recommendations about distributions and IRA rollovers. (By the way, I believe FINRA’s Investor Alert on rollovers is helpful and should be given to prospective rollover customers.) Then, to put an exclamation point on that guidance, both FINRA and the SEC listed rollovers to IRAs as one of its 2014 Examination Priorities for broker-dealers.

Finally, it is commonly expected that the DOL will issue its proposed regulation on the definition later this year…and that the proposal will expand its prior guidance on “capturing” rollovers. Fiduciary status alone increases the scope of the DOL’s jurisdiction and … Read More »


Responsible Plan Fiduciaries and Disclosure Issues

Posted on September 4, 2013, by Fred Reish in 408(b)(2), Broker-Dealers, fiduciary, Plan Sponsors, Recordkeeper, Registered Investment Advisers, RIA, Service Providers. Comments Off on Responsible Plan Fiduciaries and Disclosure Issues

The 408(b)(2) regulation requires that its service, status and compensation disclosures be made to “responsible plan fiduciaries” or “RPFs.” In the rush to make the 408(b)(2) disclosures, most recordkeepers, broker-dealers and RIAs sent their disclosure documents to their primary contact at the plan sponsor. In at least some of those cases, the primary contact was not the RPF. As a result, we added language to our clients’ disclosures to the effect that, if the recipient was not the RPF, the written disclosure should immediately be forwarded to the RPF.

The regulation defines RPF as “a fiduciary with authority to cause the covered plan to enter into, or extend or renew, the contract or arrangement.” In other words, it is the person or committee who has the power to hire and fire the particular service provider, e.g., the broker-dealer, recordkeeper or RIA.

Because … Read More »




Recent Insights

Interesting Angles on the DOL’s Fiduciary Rule #45

The DOL Fiduciary “Package”: Basics on the Prohibited Transaction Exemptions

This is my 45th article about interesting observations concerning the Department of Labor’s fiduciary rule...

Interesting Angles on the DOL’s Fiduciary Rule #44

The Basic Structure of the Fiduciary Package (June 9)

This is my 44th article about interesting observations concerning the Department of Labor’s fiduciary rule and...

Interesting Angles on the DOL’s Fiduciary Rule #43

BICE Transition: More Than the Eye Can See

This is my 43rd article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions....