Practical analysis for investment professionals
08 April 2016

DOL Fiduciary Rule: Moving Investment Advice in the Right Direction

DOL Fiduciary Rule: Moving Investment Advice in the Right Direction

The US Department of Labor (DOL) issued its new fiduciary rule this week. Enterprising Investor‘s sister publication, Market Integrity Insights, offered the following take on the new requirements.

After more than a year of posturing, agonizing, and distress, the US Department of Labor (DOL) has finally released its conflicts of interest and fiduciary rules for personal retirement accounts, including IRA rollovers. While the rules steadfastly maintain their requirement for a best-interests contract for most arrangements between investors and nonfiduciary advisers, the federal agency relented on a number of troublesome implementation matters, thus making it more palatable and implementable. Whether that will assuage the brokers and insurers who will be hardest hit is unlikely, but CFA Institute is pleased that the rules continue to move the business of advice in the direction of putting investors’ interests first.

To be sure, the rules are still complex and will be a pain to implement for those who aren’t already operating under a fiduciary duty requirement. They may even prove troublesome for those who already operate under a fiduciary duty, despite assurances to the contrary. Nevertheless, complexity is all but certain given the difficult task assigned to Labor, namely to assure that nonfiduciary practitioners give unconflicted advice to their retirement investor-clients. CFA Institute has long held that a simpler, more effective solution to investor confusion over these issues of standards of care would come from restricting the use of the term adviser — including its derivative using an “o” rather than an “e” — to those who must adhere to the Investment Advisers Act. Everyone else would call themselves a broker or salesperson. But that is a solution requiring action from the Securities and Exchange Commission (SEC), and therefore a matter for future advocacy.

Read more on Market Integrity Insights.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: Jeff Kulak, 2014

About the Author(s)
Jim Allen, CFA

Jim Allen, CFA, is head of Americas capital markets policy at CFA Institute. The capital markets group develops and promotes capital markets positions, policies, and standards.

1 thought on “DOL Fiduciary Rule: Moving Investment Advice in the Right Direction”

  1. One solution might be to just go back to the old “registered representative” title to designate them as sales agents of their broker-dealer rather than as advisors to the investor.

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