Broker Check

DOL- Department of Labor

| November 16, 2017

Assume for a moment you are going to take the trip of a lifetime, to somewhere you have dreamed of going for a long time. Do you use a travel agent or make all the arrangements yourself? What day do you leave? Fly or drive? Where do you stay when you get there? What do you do while you are there? Now assume that you or the travel agent may be required to defend that each of those decisions was the best choice to the exclusion of all the other options. 

From an admittedly independent viewpoint, this is the parallel I see to new regulations that will settle on financial advisors known as “the fiduciary standard”. In the simplest terms, the intent is to make assurances that a financial advisor dealing with retirement accounts acts solely in the client’s best interest. Many have the initial reaction: “so, they didn’t have to already?” You have taken the first step in the nuanced language and terminology of the new rules. First: how would one define “Best”, and Second: because it wasn’t a regulation before doesn’t mean it wasn’t being done.

You may have become aware of these proposed changes as early as 20101, when President Obama proposed new rules be implemented through the Department of Labor, making these proposed changes often referred to as “the DOL rules”. Debate, sometimes heated, rages to this day whether the regulations were intended to actually protect investors2
or to win votes by presenting a scenario that The Government is the only entity able to stand between ill-informed investors and predatory advisors3.

A two week open comment period was held by the Department of Labor in 2011 4, which lead to proposed regulations of 1,023 pages5. It is important to note that these proposed changes only apply to retirement accounts (IRAs, 401ks, and similar accounts) but not after-tax investments.

These regulations were set to be implemented in April of 2017 6. However, President Trump ordered a delay in the implementation of the regulations, asking the Department of Labor to provide an updated economic and legal analysis to consider if investors would be more likely helped or harmed by the proposed regulation, and whether it is likely to cause an increase in litigation and costs for retirement services. Most recently, the implementation date has been delayed until at least June with further delays somewhat likely.

The uncertainty of this has put stress on the daily business of providing retirement guidance to investors7, as nearly 10,000 Baby Boomers turn 65 every day8. Many broker-dealers have taken the position of implementing their own fiduciary standards regardless of how or when the government regulations are finalized9.

One central point of all of this is the concept of how an adviser is compensated for their work, and to attempt to create rules so an advisor could not be influenced in their recommendations by their own compensation. The regulations lean toward the litmus test of the lowest cost alternative being the safest course for compliance with the regulations, but the ultimate judgement is left with the court system. Further, accepting a client’s fee for service opens the advisor to the exposure of class action lawsuits if a case could be raised that a product or recommendation was not in the client’s best interest.

Trying to summarize the DOL regulations in a few paragraphs is comparable to outlining the history of mankind by saying, “First there was Adam and Eve, and now here we are.” A lot of detail has been omitted, and some would debate even the starting point.

Where does that leave us now? Would these new rules provide more investor protections or create more risk for advisors in taking smaller accounts? Is providing service for an ongoing fee a better approach than commissions? If so, what is a reasonable fee based on? Will more regulations be able to stop the next Bernie Madoff?

You as a consumer have the right, as you always have, to ask anyone providing retirement advice

➢ Do you consider yourself a fiduciary?
➢ How are you compensated?
➢ Are you a licensed registered representative or a registered investment adviser, and what is the difference?

I end where I may be planning on taking a trip. You could do all of the planning yourself, or choose to use an adviser. Advisers are paid for their time and advice. Who should sit in judgement of what travel plan is in your “best interest”?

As you see, the DOL Rule is very complicated. I would really love to hear any thoughts or questions you may have on this subject.


Bryan Trible, CLU, CRPC
Financial Advisor


1 DOL Fiduciary Rule timeline

2 Intent of regulation

3 Government only entity able to protect investors

4 Comment Period

5 Number of pages in DOL Fiduciary Rule

6 Rule Implementation / Delay

7 Stress on Broker Dealers

8 Baby Boomers turning 65 daily

9 Broker Dealer responses