Insight into the DOL’s Conflict of Interest Rule

Last year as the initial Conflict of Interest Proposal caught many retirement planning industry experts by surprise, we provided insight on this game-changing proposal from Pete Swisher, CFP©, CPC, Senior Vice President and National Sales Director at Pentegra Retirement Services, an ABG member firm. As one of the industry’s top retirement plan experts, Pete drafted a series of whitepapers that explored the pros and cons of the new proposal.

Since then the proposal has evolved significantly and now the final rule is a reality. On April 6th, 2016 the U.S. Department of Labor’s final Conflict of Interest Rule was formally announced. The rule requires advisors who oversee retirement accounts to act under fiduciary standards.

Things to Note About the Conflict of Interest Rule

  • Covers all financial professionals offering investment advice for retirement accounts which includes 401(k)s and IRAS.
  • Requires that anyone providing investment advice to retirement plan sponsors and participants follow the fiduciary standard of conduct under the Employee Retirement Security Act (ERISA).
  • Will be phased in with the transition period beginning April 10, 2017 and ending January 1, 2018 when all new procedures must be in place.

Considerations for Plan Sponsors

  • The employer and any board member or staff committee involved in decision making for a retirement plan are already considered fiduciaries. This requires them to keep participants’ best interests in mind when selecting and monitoring plan investments and service providers and they are subject to potential liability if they do not.
  • In the past certain financial advisors including broker-dealers, insurance agents and mutual fund firm representatives have not been subject to liability under the fiduciary standard.
  • Now nearly any type of advisor that a plan would rely on to provide investment advice to plan sponsors and participants will be held to fiduciary standards.

Further Information

In his latest whitepaper, Game Changer, Revisited, Pete Swisher provides greater insight into the scope of the Conflict of Interest Rule and its potential impact over time. This includes his thoughts on: “¢ The conversion to fiduciary status “¢ The migration to fee-based service “¢ The new compliance infrastructure

As always your local ABG representative is available to you as a resource for any questions you may have. â–