Fiduciary Groundhog Day: What Just Happened?

Uncertainty has made it extremely hard for stakeholders to tell

For 401k advisors, it’s the repetitive fiduciary frustration of Groundhog Day; except the part of Phil the weatherman will be played by Alexander Acosta. Constant DOL fiduciary rule delays, new attempts at repeal, and multiple comment periods are now the norm.

On August 10, the DOL submitted proposed amendments to the Office of Management and Budget that extend the applicability date of the Best Interest Contract Exemption (BICE) to July 1, 2019.

The uncertainty surrounding these developments has made it extremely hard for stakeholders to tell what’s happening. In previous comments, we expressed our confidence that it’s too late to stop the key parts of the rule, and that ultimately courts will not allow a reversal.

The June 9 effective date for Impartial Conduct Standard has thus far proven us correct, since on that day anyone involved with IRA assets or annuities essentially became an ERISA fiduciary. ERISA fiduciary status is completely different from SEC fiduciary status and much more stringent.

So, what happened on August 10 and will Punxsutawney Phil see his fiduciary shadow?

What Happened
The DOL is looking to delay the BIC exemption, along with others. But BICE is the primary enforcement mechanism. The DOL was never intended as the rule’s enforcer, rather it was to be left to litigation attorneys. Delaying BICE is (potentially) a huge relief for those subject to it. In addition to enabling class action lawsuits, BICE would require advisors to sign a best interest contract that explains how they might not be acting in the investors best interest—a tough conversation by any standard.

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