The Department of Labor (DOL) 2017 Fiduciary Rule came into effect June 9, 2017 to expand how investment advice impacts clients. For many Certified Financial Planners™ this rule was already implemented because their mission has always been to serve the financial interests of clients instead of their own investment practices.
This new rule brings other financial advisors up to the level where King Financial Corporation has been all along. From the beginning King Financial has been providing retirement planning services to clients from a neutral position without inherent conflicts of interest.
What the 2017 Fiduciary Rule means to the public
Financial advisors cannot conceal any personal interests that would result in personal gain. Self-dealing occurs when a professional encourages or accepts a transaction from another individual or organization that benefits him or herself at the detriment of the client.
The rule also means that all fees and commissions must be clearly disclosed to clients.
The new Fiduciary duty brings a higher level of accountability to the financial planner who works on retirement plans and accounts. Previously, the Suitability standard allowed an advisor to provide a recommendation based solely on the appropriateness to the client's objective. Now, all financial professionals are legally required to follow new laws that put their clients' interests ahead of their own by forcing a full disclosure on any activity that would potentially benefit the financial advisor.
However, there could be situations where a customer calls a financial advisor to ask for a specific product or investment without seeking advice. In these situations advisors may provide education to clients regarding the general structure of those investments but wouldn't necessarily be providing financial advice. Additionally, any taxable transactional accounts or accounts funded with after-tax dollars are not considered retirement plans and do not fall under the new DOL Fiduciary rule.
What retirement plans are impacted by new 2017 Fiduciary rules?
Most financial plans involving defined contributions are impacted by the new legislation, but the rules cover any investment vehicles where conflicts of interest could arise.
- 401(k) plans
- 403(b) plans
- Employee Stock Sharing plans
- Simplified Employee Pension (SEP) plans
- Individual IRA plans
- Savings Plans (simple IRAs)
- Defined Benefit plans
This new "Fiduciary Standard" particularly applies to rolling over an employer plan to an IRA and how a Registered Investment Representative offers advice. Financial advisors must act in the best interest of clients without conflict to their own investments. Primarily, the brokers and insurance agents who provide financial services are the ones who are having to change the way they do business.
How did the 2017 Fiduciary rules come into effect?
The United States Department of Labor lays out the regulation and exemptions for this Conflict of Interest Final Rule. President Trump signed a Presidential Memorandum directing the Department of Labor to examine the 2017 Fiduciary rule in February. This resulted in the Deparment of Labor's Fiduciary Rule taking effect earlier this month.
Secretary of Labor Alexander Acosta wrote in the Wall Street Journal that the Obama-era investor protection will be fully implemented by January 1, 2018. It is noteworthy that this new administration is not amenable to the new rule:
We have carefully considered the record in this case, and the requirements of the Administrative Procedure Act, and have found no principled legal basis to change the June 9 date while we seek public input. Respect for the rule of law leads us to the conclusion that this date cannot be postponed. Trust in Americans’ ability to decide what is best for them and their families leads us to the conclusion that we should seek public comment on how to revise this rule.
– Secretary of Labor, Alexander Acosta
King Financial Corporation remains devoted to helping investors and organizations achieve their financial goals while adhering to new regulations. Brian King and his firm have been consistently providing financial services with the goal of preserving wealth and responsibly growing investment portfolios while helping to ensure other insurance and security-minded practices are central to clients. New and existing clients are encouraged to reach out to King Financial if any questions arise about these new regulations and how they might impact their portfolios.