The delayed date for the DOL fiduciary regulation hasn’t changed again. June 9th is the effective date with much of the enforcement delayed until January 1st of 2018. What does this mean for both retirement investors and plan sponsors? For investors it means you will likely see some additional disclosures when deciding whether to do a rollover or keep money in your retirement plan.
What many broker dealers are doing is narrowing the universe of vendors to those who “support” their home office. This “support” isn’t exactly what the DOL had in mind when they devised the rule. If you are working with a big national brand, ask some additional questions about what type of “support” product vendors provide to the home office.
For plan sponsors, if you work with an advisor who isn’t currently operating in a fiduciary capacity, you are likely going to see one of three outcomes. 1) Your advisor is suddenly a fiduciary and they can continue to operate on your plan. Advisors that focus on qualified plans are being allowed to serve in a fiduciary capacity however the issues that we mention above about alliance partners who provide support hold true. Do you really want advice from a fiduciary who is inherently conflicted?
2) You will be reassigned to an advisor at the same firm but one who specializes in qualified plans. Much like #1 above, you face all the same issues but you are now paying a generalist for the relationship and a specialist for the actual work. You won’t pay more in this case but why have the generalist in the first place?
3) Your advisor will utilize an outsourced fiduciary. What you are paying for is an unaffiliated advisor to scrub the fund list and make your selections for you. You pay an extra fee for that while your generalist advisor continues to provide education on the plan. There are a whole host of issues with this. You don’t get customized advice that fits your employees. In addition, the real fiduciary support that is required on plans frequently hinges on benchmarking of vendors, analyzing plan design, and providing custom communications. If your benchmark is confined to alliance partners, what is the point?
The DOL rule is a well intentioned rule that likely won’t have the intended effect that was originally sought. Fortunately investors and plan sponsors are starting to ask the right questions. We are hopeful we will move to a fiduciary standard for all investments (not just retirement) as the industry moves away from the traditional product manufacturer & distribution model to one of true advice. Fortunately as a consumer you have a choice as there are many unconflicted advisors that have been operating for decades.