The April 2016 release and distribution of the Department of Labor rules describing the new definition of Fiduciary sent shock waves throughout the financial industry. The new fiduciary rule will change the landscape for every company that sponsors a tax qualified retirement plan. The new rule, scheduled for full implementation on April 10, 2018, will expand the number of financial firms and advisors who are to be considered fiduciaries.
What is Wrong with More Advisors Serving as Fiduciaries?
There is nothing wrong with having more fiduciaries provided the financial professionals are prepared and educated on the subject. However, the passing of rules or regulation by an agency of the U.S. government does not overnight prepare a workforce for the task. Because of just that, many financial service firms are currently assessing business strategy, product readiness and workforce competency.
Recently, a well-known insurance industry firm, State Farm announced their decision to eliminate mutual fund sales and variable annuity sales among two-thirds of their agents. The net result is that 12,000 agents will be removed from the sales of specific product lines. Instead of using traditional agents to deliver products, State Farm will only distribute and service mutual funds, variable products and tax-qualified bank deposit products through a self-directed customer call center.
What is to be Expected?
Viewing this occurrence through another lens one might ask the question, “Is having fewer qualified advisors the solution to what the investing public needs?” State Farm is not the only organization exiting tax-qualified retirement plans (401k plans) or individual retirement accounts (IRAs) as a strategy. Post the new DOL fiduciary rule, it is anticipated that every plan sponsor will need to execute new paperwork and establish new procedures to fully establish a new relationship with their retirement plan advisor.
