One of the basic rules for fiduciaries is that “there is no place to hide,” says Keith Sartain, a partner at AON Hewitt.
Sartain spoke at an April 3 session of the Enrolled Actuaries meeting in Washington, D.C. cosponsored by the American Academy of Actuaries and the Conference of Consulting Actuaries. Other panelists also included Nick Davies, a partner at Mercer, and Lindsay Jackson, an associate at Morgan Lewis Bockius.
Addressing the Labor Department’s fiduciary rule, Jackson noted that it “very broadly changes the definition of fiduciary status.” Even if one is a nondiscretionary advisor, one could still be subject to the rule regarding discretionary recommendations. What it boils down to, she said, is how much responsibility financial advisors have for the advice they give vs. how much responsibility individuals have.
Davies said the rule could:
While there are those who criticize the rule, Jackson said there were some good aspects to the rule. For instance, she said, “Reviewing fee structure is a good thing.” Davies also sees a silver lining, saying that there are “certain bad situations” the rule is intended to address. “That makes good sense,” Davies noted.
Still, said Jackson, while “the intention of the rule is good,” there is a problem with its execution. “It’s never quite as black and white as you’d hope,” Davies agreed.
“We’re dealing with a really, really crazy time right now,” said Jackson, adding that “we are optimistic” that the Office of Management and Budget will issue the DOL’s proposal to delay the rule’s applicability in time; the rule is set to become applicable April 10, 2017. She also noted that there is a legislative proposal to take IRAs out of DOL jurisdiction altogether and put them under that of the Securities and Exchange Commission. “There is some sense to that,” Jackson said.
In light of the uncertainty surrounding the rule, said Jackson, their firm is talking to firms “all the time” regarding contingency planning. And she called the guidance the DOL issued in Field Assistance Bulletin 2017-01, in which the DOL said will not initiate any enforcement action if a “gap period” results because a delay of the applicability date is not issued in advance of April 10, “very helpful.”
But even is the rule is not made applicable, is altered or rescinded, “a lot of these issues are going to still be relevant,” said Jackson. Davies agreed: “It seems very hard to believe these things are going to go away.”
Sartain spoke at an April 3 session of the Enrolled Actuaries meeting in Washington, D.C. cosponsored by the American Academy of Actuaries and the Conference of Consulting Actuaries. Other panelists also included Nick Davies, a partner at Mercer, and Lindsay Jackson, an associate at Morgan Lewis Bockius.
Addressing the Labor Department’s fiduciary rule, Jackson noted that it “very broadly changes the definition of fiduciary status.” Even if one is a nondiscretionary advisor, one could still be subject to the rule regarding discretionary recommendations. What it boils down to, she said, is how much responsibility financial advisors have for the advice they give vs. how much responsibility individuals have.
Davies said the rule could:
- decrease income from alternative sources;
- increase fees resulting from initial and ongoing compliance costs;
- further consolidate the market, resulting in less competition and increased fee pressure; and
- create opportunities for new financial services models.
While there are those who criticize the rule, Jackson said there were some good aspects to the rule. For instance, she said, “Reviewing fee structure is a good thing.” Davies also sees a silver lining, saying that there are “certain bad situations” the rule is intended to address. “That makes good sense,” Davies noted.
Still, said Jackson, while “the intention of the rule is good,” there is a problem with its execution. “It’s never quite as black and white as you’d hope,” Davies agreed.
“We’re dealing with a really, really crazy time right now,” said Jackson, adding that “we are optimistic” that the Office of Management and Budget will issue the DOL’s proposal to delay the rule’s applicability in time; the rule is set to become applicable April 10, 2017. She also noted that there is a legislative proposal to take IRAs out of DOL jurisdiction altogether and put them under that of the Securities and Exchange Commission. “There is some sense to that,” Jackson said.
In light of the uncertainty surrounding the rule, said Jackson, their firm is talking to firms “all the time” regarding contingency planning. And she called the guidance the DOL issued in Field Assistance Bulletin 2017-01, in which the DOL said will not initiate any enforcement action if a “gap period” results because a delay of the applicability date is not issued in advance of April 10, “very helpful.”
But even is the rule is not made applicable, is altered or rescinded, “a lot of these issues are going to still be relevant,” said Jackson. Davies agreed: “It seems very hard to believe these things are going to go away.”
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