The DOL Fiduciary Rule Is Here

By Rob Klapprodt, Corporate Strategy Officer


A wind of change has arrived for the wealth management industry. The DOL Fiduciary Rule, which requires retirement-account advisors to adhere to the fiduciary standard, will go into partial effect on June 9, with full implementation scheduled for the start of 2018.

Ending weeks of speculation surrounding the DOL ruling, Labor Secretary Alexander Acosta confirmed this change in a Wall Street Journal op-ed:

“We have carefully considered the record in this case…and have found no principled legal basis to change the June 9 date while we seek public input. Respect for the rule of law leads us to the conclusion that this date cannot be postponed.”

The DOL clarified two provisions — one expanding the definition of who is a fiduciary and another establishing an impartial conduct standard — will apply when the delay ends on June 9. However, enforcement of the best-interest contract exemption (BICE) is on hold until January 1, 2018.

The industry has long debated the implications of the ruling. Major players have raised concerns about the increase in time and resources spent on compliance-related activity, exposure to litigation from heightened risk and specific regulation permitting class action, reductions in product access and choice, and increases to the service cost per client.

While these concerns are serious and legitimate, the cost of noncompliance is consequential. Since the announcement of the ruling nearly two years ago, many of the firms we work with began assessing the impact of the impending rule, strategizing how to orient their advice models to absorb the change, and executing their strategy.

In fact, when the rule was in limbo a few months ago, Brendan McConnell, Chief Operating Officer at Brinker Capital had this to say, “Regardless of what happens to the fiduciary rule, the fiduciary genie has been let out of the bottle.” Technology that can offer low fees, high levels of transparency, and a lack of an overt conflict of interest will be key to staying on the right side of regulation and client sentiment going forward.

McConnell’s outlook has not been widely shared across the industry. Many companies and financial advisors have delayed acting in hope that the rule would never see the light of day. For these firms, change of this magnitude will be difficult but not impossible to implement. There is a community of trusted resources and technology providers that can help with compliance. In fact, vendors like Vestmark have already helped many large broker dealers prepare for the ruling and we are here to help you, too. Contact us for more information.

By Rob Klapprodt, Corporate Strategy Officer