The fate (and sensibility) of the DOL’s conflict of interest rule was hotly debated at the recent Investment News Retirement Income Summit in Chicago by representatives of the insurance and fee based advisor community. Like the rule itself, the debate left more questions than it answered but it does appear that certain aspects of the rule will become applicable on June 9th pending, of course, action by the yet-to-be-confirmed DOL Secretary nominee Alexander Acosta.
What Investment News Summit panelist Robert deChellis (Allianz and Insured Retirement Institute) and Maureen Thompson (CFP Board) along with Investment News Senior Editor Mark Schoeff agreed on was that the fiduciary and Impartial Conduct Standard would become applicable.
What is more unknown is the fate of the Best Interest Contract exemption not set to become applicable January 1, 2018 with panelist agreeing that it might get watered down by the new regulators put in place at the DOL by an administration clearly opposed to the rule.
And while the DOL hold on enforcement of the rule is now moot, it appears that enforcement of IRAs over which the DOL has no authority relying on litigation is not likely to occur with the private right of action for IRA holders on hold.
The entire discussion about the DOL rule itself could be moot depending on what the new DOL Secretary does along with his EBSA Director. That nomination which was approved by the Senate HELP Committee was fast tracked and seems likely to go forward.
While the rule does not immediately and directly affect defined contribution (DC) plan sponsors, it does significantly affect their record keeper and advisor partners most of whom are acting as if the rule will become applicable on June 9th. Which means that almost all advisors working on a 401k and 403b plan will be a fiduciary putting a greater responsibility on plan sponsors to select one that is qualified.
With 250,000 advisors working or getting paid on a DC plan of which 225,000 do not have minimal education, training and experience, the DOL rule will not magically make them qualified overnight putting a greater burden on plan sponsors and raising potential for increased liability.
