cover story
Five things that will change the way you do business
INDUSTRY EVOLUTION
Brace yourself. Rarely have advisers faced so many
fundamental shifts simultaneously—and at the same
time as national and global economies still slump and the
market volatility continues. Consider the U.S. Department
of Labor’s (DOL) revisions to its fiduciary-definition
proposal; the implementation and aftereffects of the DOL’s
new fee-disclosure rules; potential new U.S. Securities
and Exchange Commission (SEC) fiduciary rules and a
stepped-up adviser-examination program; sponsors’
growing demand for customized and index investment
options; and Baby Boomers beginning the transition from
the accumulation phase to decumulation. Here, experts
talk about how these five key shifts could affect the
business of being a plan adviser.
1.Gauging a new fiduciary definition’s impact. The industry awaits the Labor Department’s revision to a
controversial proposal that would substantially broaden
the definition of a fiduciary under the Employee Retirement
Income Security Act (ERISA). The key for advisers to watch:
what exemptions, if any, the DOL proposes.
“We are asking the DOL to carefully target its proposal
on well-defined and documented problems, and balance
the cost and benefits,” says David Bellaire, general counsel
and director of government affairs at the Financial Services
Institute Inc. (FSI), which represents independent broker/
dealers and independent advisers. Most contentiously, the
previous proposal suggested that advising people about
individual retirement accounts (IRA) crosses the fiduciary
line. With the revision, “The question is going to be more
about how [the DOL] deals with that IRA issue,” says Dan
Barry, director of government relations at the Financial
Planning Association (FPA). “Do they provide some sort
of exemption, and if so, is it workable from the industry’s
perspective?” Expect some shifts. “From what we are
hearing, the department has in mind to be responsive to
at least some of the public commentary received on the
scope of the proposal,” says Mark Smith, a Washington-based partner at law firm Sutherland Asbill & Brennan
LLP. Department officials have spoken about considering
exemptions, such as with the indirect-compensation
methods like revenue sharing, he says. They also have
