Be honest—have you read the whole thing?
The final published form of the Department of Labor (DOL)’s
landmark fiduciary rule weighs in at over 1,000 pages.
Anyone even half familiar with the nitty-gritty of employee
benefits law and of federal rulemaking in general can imagine just how terse
those pages are, and just what the process of actually sitting down and
carefully digesting the mountain of paper and ink entails. Luckily for advisers
and plan providers alike, there is no shortage of ERISA [Employee Retirement
Income Security Act] attorneys to provide guidance.
One voice is Steven Wilkes, a partner with the Wagner Law
Group, who is based in Boston. Wilkes says that, as plan advisers head into the
final quarter of 2016, many will need to institute formal changes to ensure
compliance with the DOL’s fiduciary rule reform.
It will not be easy or particularly fun, actually sitting
down to read the rulemaking language, he admits, but there is so much that can
vary from practice to practice, individual firms absolutely must perform their
own close review.
Even for firms that decide to maintain their old business
models and rely instead on the Best Interest Contract (BIC) exemption,
technical compliance does not ensure client satisfaction. Experts interviewed
for this article pretty much agree that flat-fee models clearly favored by the
DOL for being perceived as less conflicted will have a competitive edge in the
new fiduciary future.
“As you consider and then implement any necessary
adjustments to compensation, any ERISA counsel you have access to should review
your documentation and the documentation needed by any providers you work
with,” Wilkes says. “It’s a complicated rule, but there is nothing like
engaging with the language yourself and asking the tough questions for
yourself, whether about your own business or that of a partner.”
On Wilkes’ reading, the new rule “clearly broadens the scope
of advisers who will be deemed individual retirement account [IRA] or defined
contribution [DC] plan fiduciaries.” What is less clear are the specific approaches
individual firms and advisers will take to ensure compliance—not to mention how
these approaches will stack up against one another and affect client
decisionmaking throughout the sales and service process. So, in that sense, the
big task currently ahead of advisers is to understand both internal and
external change driven by the rule.