Tag Archives: proposed

The New Fiduciary Rule (7): Non-Discretionary Investment Advice


2020-02, best interest, DOL, fiduciary
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The U.S. Department of Labor has released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment advice to plans, participants (including rollovers), and IRAs (including transfers).

Key Takeaways

  • The Department of Labor’s proposed regulation defining fiduciary investment and insurance advice to private sector retirement plans, participants in those plans, and IRA owners (collectively, “retirement investors”) includes three distinct definitions.
  • Those definitions are discretionary investment management, non-discretionary investment advice, and acknowledgement of fiduciary status.
  • The most controversial of these proposals is the new definition of non-discretionary investment advice. If an investment adviser, broker-dealer, or insurance agent (“investment professional”) satisfies that definition, the investment professional will be a fiduciary under ERISA and the Internal Revenue Code.

This post discusses the “non-discretionary” definition of fiduciary investment advice in the DOL’s proposed fiduciary regulation. The other two definitions of fiduciary status are covered by my posts The New Fiduciary Rule (5) and The New Fiduciary Rule (6).

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The New Fiduciary Rule (6): The Fiduciary Definition of Fiduciary


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The US Department of Labor has released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment advice to plans, participants (including rollovers), and IRAs (including transfers of IRAs).

Key Takeaways

  • The Department of Labor’s proposed regulation defining fiduciary investment and insurance/annuity advice to private sector retirement plans, participants in those plans, and IRA owners (collectively, “retirement investors”) includes three distinct definitions.
  • Those definitions are: discretionary investment management, non-discretionary investment advice, and acknowledgement of fiduciary status. In each of those cases, the person and the firm will be fiduciaries under ERISA and the Internal Revenue Code for purposes of their investment recommendations and services to retirement investors.
  • A new definition in the proposal, and one that is not likely to be controversial, is the third one….a person will be a fiduciary for investment recommendations if that person says that the person and/or the firm are acting as fiduciaries for the recommendation.

This post discusses the “fiduciary acknowledgement” definition of fiduciary investment advice in the DOL’s proposed fiduciary regulation. More specifically, the proposed regulation says that a person will be an ERISA and Code fiduciary if “The person making the recommendation represents or acknowledges that they are acting as a fiduciary when making investment recommendations.” (There will be future articles discussing “investment recommendations”, but for the moment, consider it to be a recommendation for a retirement investor to invest in securities, insurance or other property.)

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The New Fiduciary Rule (5): Discretionary Investment Management


2020-02, DOL, fiduciary, investment adviser, IRA
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The US Department of Labor has released its package of proposed changes to the regulation defining nondiscretionary fiduciary advice and to the exemptions for conflicts and compensation for investment recommendations to retirement plans, participants (including rollovers), and IRAs.

Key Takeaways

  • The Department of Labor’s proposed regulation defining fiduciary investment and insurance advice to private sector retirement plans, participants in those plans, and IRA owners (collectively, “retirement investors”) includes three distinct definitions.
  • Those definitions are discretionary investment management, nondiscretionary investment advice, and acknowledgement of fiduciary status.
  • The least controversial definition is that, when an investment professional provides investment management, or discretionary, services to retirement investors, the investment professional will be a fiduciary under ERISA and the Internal Revenue Code.

This post discusses the “discretionary” definition of fiduciary investment advice in the DOL’s proposed fiduciary regulation.

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The New Fiduciary Rule (4): A Relationship of Trust and Confidence


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The US Department of Labor has released its package of proposed changes to the regulation defining nondiscretionary fiduciary advice and to the exemptions for conflicts and compensation for investment recommendations to retirement plans, participants (including rollovers), and IRAs.

Key Takeaways

    • The Department of Labor’s proposed fiduciary “package” includes a new definition of nondiscretionary fiduciary investment advice.
    • In overturning the Obama-era fiduciary regulation, the 5th Circuit Court of Appeals said that the DOL’s definition of nondiscretionary fiduciary advice failed to define a relationship of “trust and confidence”. In the view of the court, fiduciary status only applied to financial recommendations made by an advisor who had a relationship of trust and confidence with an investor.
    • In drafting the new proposed fiduciary regulation, the Department of Labor considered that holding and made an effort to define nondiscretionary advice in a manner consistent with a trust and confidence standard.

This article discusses the DOL’s proposed definition of nondiscretionary advice and the comments in the preamble about relationships of trust and confidence.

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The New Fiduciary Rule (3): Fixed Indexed Annuities


2020-02, DOL, fiduciary, IRA, rollovers
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The US Department of Labor has released its package of proposed changes to the regulation defining nondiscretionary fiduciary advice and to the exemptions for conflicts and compensation for investment recommendations to retirement plans, participants (including rollovers), and IRAs.

Key Takeaways

    • Statements from the White House indicate that the DOL and the White House are concerned that fixed indexed annuities may be inappropriately sold to participants and IRA owners (“retirement investors”) in connection with recommendations to roll over benefits from plans and to transfer money from IRAs. Some of the political rhetoric accompanying the release of the proposals was unusually harsh.
    • The reaction from the insurance industry and state insurance commissioners has been immediate and strong.
    • If the proposals become final as written, the greatest impact of the changes will likely be on insurance agents, particularly independent producers.
    • The greatest impact on products will likely be on fixed indexed annuities.
    • This and several following articles will cover the impact on independent insurance agents, insurance companies, and annuities.

This article discusses the DOL’s thoughts on prudent processes for evaluating fixed indexed annuities, which dates back to the Obama-era Best Interest Contract Exemption (which was vacated in 2018 by the 5th Circuit of Appeals).

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The New Fiduciary Rule (2): The Impact


2020-02, DOL, fiduciary, IRA, rollovers
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The US Department of Labor has released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment advice to plans, participants (including rollovers), and IRAs.

Key Takeaways

  • The Department of Labor’s proposed fiduciary “package” will have different impacts on different types of service providers to retirement plans, participants, and IRA owners (collectively, “retirement investors”) . . . .investment advisers, broker-dealers, banks and trust companies, and insurance agents (and companies) (“financial professionals”).
  • The greatest impact of the changes, if finalized as is, will be on insurance agents, particularly independent producers. Insurance companies issuing the life insurance policies and annuity contracts will also see increased compliance burdens.
  • For all of the types of financial professionals, the most impactful change will likely be that one-time investment recommendations to private sector retirement plans and their participants, and to IRA owners, will be fiduciary advice. That includes rollover recommendations.

This post discusses the likely impact of the new proposals. Future posts will go into more detail about the proposals and compliance issues:

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The New Fiduciary Rule (1): An Overview


2020-02, DOL, fiduciary, IRA, rollovers
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The US Department of Labor has released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment advice to plans, participants (including rollovers), and IRAs.

Key Takeaways

  • One time investment recommendations to qualified and ERISA retirement plans and their participants, and to IRA owners, can be fiduciary advice. Plans, participants and IRA owners are referred to as “retirement investors”.
  • A rollover recommendation is one-time advice that will result in fiduciary status.
  • Fiduciary recommendations that result in compensation to a securities adviser (that is, to an investment adviser or broker-dealer) or to an insurance agent will be prohibited conflicts of interest, necessitating satisfaction of the conditions in a prohibited transaction exemption.

This blog post is an overview of the new proposals. Follow up posts will go into detail on each of the proposals.

The proposed fiduciary regulation—called the “Retirement Security Rule”–defines fiduciary advice as follows:

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