On April 6th, the Department of Labor (DOL) released the long-awaited fiduciary regulatory package which sets a new standard for advice given to retirement investors. Under this final package, financial advisors who provide investment advice will face limits on receiving commission-based compensation. With up to 50% of US retail financial assets in retirement accounts, the impact of the rule will be widespread across asset managers, broker dealers, and insurance companies.
- The commission-based compensation model is under less jeopardy.
- The DOL has more clearly distinguished between investment advice and investor education.
- Contracts needed to utilize the Best Interest Contract (BIC) exemption are more flexible and simpler to initiate.
- Simplified updates to existing contracts will likely ease BIC implementation.
- Proposed disclosure and document retention requirements for utilizing the BIC exemption have been softened.
- Most investment products will be allowed under the BIC exemption.
- Variable and indexed insurance products are both now covered under the BIC exemption.
- A new “level fee fiduciary” concept is introduced, with eased conditions to utilize the BIC exemption.
- Financial advisors can provide advice to more plans and IRAs without being deemed a fiduciary.
- Implementation timeline is extended.