The 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 California is representative of a common question related to the DOL’s re-proposed rule that would define investment advice fiduciary. The advisor asked:
“Has Congress issued any reports recently on the DOL’s re-proposed rules on investment advice fiduciaries?”
Highlights of Discussion
- Much has been written about the proposed rule from the Department of Labor (DOL) that would redefine who would be considered a fiduciary by virtue of providing investment advice for a fee. A new report released from the Congressional Research Service (CRS), “Department of Labor’s 2015 Proposed Fiduciary Rule: Background and Issues,” provides a history of how the financial services industry got to this point, a concise summary of the proposed rule, and concerns and issues the proposal raises. Among other things, the report includes a table that compares the definition of investment advice under the DOL’s current regulation to the definition under the proposed regulation.
- As evidenced by the voluminous comments the DOL has received, stakeholders (such as members of Congress, financial services professionals and firms, and advocacy groups) have a variety of views on the proposed rule. Some support the rule, some broadly support the goals of the proposed rule but disagree on the specifics of the rule, and others oppose the rule. For example, according to the CRS report, it is hard for professionals in the financial services industry to argue against applying a standard of conduct in which they operate in the best interests of their clients. But many have indicated that they already uphold this standard. Although many financial services professionals support the best interests standard, they also feel that the proposed rule may not be the way to achieve it because certain aspects may be too challenging to implement. Other concerns discussed in the CRS report include, but are not limited to the following:
— The proposed rule could restrict firms from offering their own products
— The expanded disclosure requirements may be unworkable
— Small businesses may find that financial institutions will be unwilling to provide advice to them under the proposed rules
Conclusion
As if there isn’t enough fodder already, the CRS’ report to Congress provides more food for thought on the DOL’s proposal to overhaul the definition of investment advice fiduciary. At just 25 pages, the report is, however, a compact summation of the past, present and potential future for retirement plan investors and their financial advisors.
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.
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