Effective June
9, 2017 the U.S. Department of Labor’s “fiduciary rule” took effect. Anyone who handles retirement assets and gives
advice (including financial professionals of all types, whether they call
themselves brokers, financial advisors, financial planners, or wealth managers)
must adhere to new “impartial conduct standards.”
The
final rule was released nearly six years after it was first proposed by the
Obama administration. The rule is set up to
roll out in phases. Other provisions within the rule are scheduled to become
effective January 1, 2018.
During the transition period, financial institutions
and advisors must adhere to the “impartial conduct standards” which ensure
adherence to fiduciary norms and standards of fair dealing. Advisors and
financial institutions must give advice that is in the “best interest” of the
retirement investor, which has two chief components: prudence and loyalty.
Under the prudence standard, the advice must meet a professional standard of
care. Under the loyalty standard, the advice must be based on the interests of
the customer, rather than the competing financial interests of the advisor or
firm. Advisers must also charge no more than reasonable compensation and make
no misleading statements about investment transactions, compensation and
conflicts of interest.
