Though the DOL rule has the attention of many DC plan sponsors, it does not change their fiduciary status or how they run their plans — except when it comes to vendors who will have to act as fiduciaries, especially advisors.
So with more advisors acting as fiduciaries, and more lawsuits, plan sponsors are asking, “Where’s the beef?” Or, if almost all advisors are acting as fiduciaries and plan sponsors are sued, what financial resources are backing that advisor?
Before the DOL fiduciary rule, fee-based fiduciary plan advisors sold against wire house advisors and others not willing or able to act as fiduciaries touting their status. Others used a designation that might take a few hours to complete online to distinguish themselves.
Plan sponsors are more concerned about fiduciary training of their investment committees and administrators than by the fact that the advisor has a piece of paper that may have little merit.
So with more and more advisors acting as DC plan fiduciaries — becoming as commodity, not a differentiator — savvy advisors will focus not just on the fact that they are able to act as fiduciaries, but on the protections they provide if clients are fined or sued, as well as the education and training they supply to their clients to help them fulfill their fiduciary responsibilities.
More advisors will be likely to get fiduciary insurance while suggesting the same to their clients. In any case, the DOL rule may actually benefit advisors who are employed by larger organizations, or at least have their backing, compared to the fee-based fiduciary advisor whose assets may consist of a set of golf clubs and a used Volvo.
Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.
