Under the finalized rule issued by the Department of Labor (DOL), a fiduciary is an adviser who provides “impartial advice in the client’s best interest and cannot accept any payments that would create conflicts of interest unless the advisor qualifies for an exemption to ensure that the client’s interests are protected.” The rule also specifies that firms must acknowledge in writing that they and their advisors are acting as fiduciaries when providing investment advice to a plan, participant, or beneficiary, although no contract is required. Education to plan participants, inclusive of naming specific funds, is only permitted if certain conditions are met. Likewise, recommendations to plan sponsors managing more than $50 million in assets will not be considered investment advice if certain conditions are met; an exemption to the fiduciary rule would not be required. However, there are exemptions under certain circumstances that would allow advisers to continue to receive payments from mutual fund revenue sharing arrangements. Such exemptions would require disclosure, inclusive of a statement of expected compensation to be received.
The aforementioned definition of fiduciary becomes effective April 2017; the detailed policies, procedures and related requirements of the aforementioned exemptions will be delayed until January 1, 2018 to allow the industry a transition period. PEI will be providing more detail concerning this rule and its interpretation in the near term.