Labor Department Sticks To Its Guns On ERISA Fiduciary Rules

Thursday, August 25, 2011 07:48
Labor Department Sticks To Its Guns On ERISA Fiduciary Rules

Tags: fiduciaries

The Labor Department is moving ahead with new rules that force everyone who provides investment advice on retirement assets to put their clients' interests first -- despite all the lobbying from broker groups.

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The ERISA cops at Labor are moving forward with their new requirement that all advisors handling IRA and employer-sponsored accounts act as true fiduciaries. 


That means no conflicts of interest whatsoever. It does not mean "acting against the client's interest is OK as long as you disclose what you're doing." It does not mean all advice only has to be "suitable."


The only gray area from their point of view now is what exactly constitutes investment advice. 


Needless to say, there are people out there complaining that this is going to make them dump their smallest IRA clients because switching to an asset-based fee would make these accounts unprofitable to work with.


However, despite claims that these millions of accounts will go without guidance, there are also plenty of advisors eager to pick them up.


The devil isn't in the compensation model or the level of duty that advisors owe their clients. The devil is in the pricing.


Any advisor who can figure out a way to serve small accounts efficiently can still do a good job without bankrupting the client or taking a personal loss. Honest.


Comments (2)

Models, models, models.... and not a lot of face time. That works fine until they want more face time. Question is: how much face time is needed, or "required", in order to satisfy fiduciary obligations. Models make it efficient to manage money, but face time is where the costs come in for most of us. And if people don't want to pay for the face time, then yeah, I think a lot of accounts will be "dumped".
vguettlein , August 25, 2011
This is, at last, a welcome change to the asset owners and plan sponsors. For far too long, brokers, posing as "financial advisors" have been using "suitability" as a doctrine to line their pockets at their clients' expense.

Having been a named fiduciary for ERISA-governed DB and DC plans and as a trustee of a nearly $50+ Billion public DC, DB and Insurance fund complex, I have disgusted by the abuses visited on plan participants, beneficiaries and members. As the former president of an RIA, my firm and its staff always behaved as a fiduciary, whether '40 Act or ERISA, and I behave like a fiduciary today in my working with clients whether obligated to or not.

Our industry puts its practitioners in a position of trust...they should be obligated to act so as to put client interests first. Period. End of Story. -30-

howardc303 , August 25, 2011

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