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Case of the Week: Investment Advice Fiduciary

ERISA consultants at the Learning Center Resource Desk, which is available through Columbia Threadneedle Investments, regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with a financial advisor in Ohio is representative of a common question about the definition of an investment advice fiduciary. The advisor asked:

“Now that the DOL has released its regulations that define when a financial advisor is subject to a fiduciary standard, when do the new rules take effect?”

Highlights of Discussion

  • The investment advice fiduciary regulations that the DOL released on April 14, along with carve-outs, new class exemptions and amendments to applicable existing prohibited transaction exemptions (PTEs) — 444 pages in all — are proposed at this time, not final. 

  • Until they are finalized, the industry must continue to operate under the existing definition of an investment advice fiduciary as established under ERISA and the pertinent DOL regulations (DOL Reg. 2510.3-21(c)) and PTEs (75-1, 86-128, 77-4, 80-83, 83-1 and 84-24).

  • The next steps for the DOL’s proposals are:

    • Formal publication in the Federal Register

    • An initial public comment period (two and a half months or 75 days)

    • A public hearing within 30 days of the close of the comment period

    • Another comment period following the hearing and publication of the hearing transcript (length of time unknown — assume 30 days)

    • Publication of a final rule in the Federal Register

    • A delayed effective date, 60 days from date of final publication

    • A delayed applicability date, eight months from the date of final publication

  • Adding up all those steps, and assuming the DOL eventually finalizes its proposals, the industry is at least six months away from an effective date and more than a year away from applying any potential new rules.

  • Until the regulatory process plays out, the industry must continue to operate under the existing rules. In broad terms, the existing fiduciary advice rule follows a five-part test. Under this test, a person is considered an investment advice fiduciary if he or she, in exchange for a fee, gives investment advice:

1. about the value of or advisability of investing in securities or other property;

2. on a regular basis;

3. pursuant to an agreement or arrangement with the plan;

4. with the understanding that the advice will serve as a primary basis for investment decisions; and

5. that is individualized to suit the needs of a specific plan.

The individual must satisfy all five criteria to be considered an investment advice fiduciary.


At this point, the DOL has reproposed rules to identify an investment advice fiduciary. A lengthy regulatory process must play out before any changes take effect or can be applied. Interested parties should prepare and submit comments to the DOL on its proposals to help it formulate final rules that are optimal for investors as well as the advice industry. Page 2 of the DOL’s “Notice of Proposed Rule Making Definition of the Term “Fiduciary”; Conflict of Interest Rule – Retirement Investment Advice” explains several methods for submitting comments. Stay tuned for further developments.

The Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC (RLC), a third-party industry consultant that is not affiliated with Columbia Threadneedle. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Columbia Threadneedle does not provide tax or legal advice. Consumers consult with their tax advisor or attorney regarding their specific situation. 

Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Columbia Threadneedle.

Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies.

© 2015 Columbia Management Investment Advisers, LLC. Used with permission.