If implemented as it stands, in April, the Department of
Labor (DOL) conflict of interest rule would expand fiduciary responsibility to
virtually all advisers servicing the retirement market, either through
providing investment advice to plans and participants or consulting about
health savings accounts (HSAs).
The rule will also assign the role of fiduciary, as defined
by the Employee Retirement Income Security Act (ERISA), to advisers who serve individual retirement accounts
(IRAs). This move places heightened scrutiny on the decision to recommend that
assets be rolled over from employer-sponsored retirement plans into IRAs.
“Advisers accustomed to parlaying defined contribution [DC]
plan assets into traditional wealth management relationships via IRA rollovers
face new obstacles,” says Dan Cook, associate analyst at research firm Cerulli
Associates. “To justify that an IRA rollover is in the best interest of a DC
plan participant, advisers will face additional compliance and operational
Similar regulatory responsibilities under the fiduciary rule
could trigger major changes to the way advisers do business, and some may leave
the DC plan space entirely—a topic explored in a new Cerulli report.
“Cerulli asserts that the hurdles the DOL conflict of interest
rule create will force another round of ‘in or out’ for the population of
advisers operating in the employer-sponsored retirement plan market,” says
Jessica Sclafani, associate director at the firm. “Some advisers will be
mandated by their broker/dealer [B/D] or wirehouse to choose between DC plan
business and traditional wealth management, rather than operate in both