PLANADVISER - July/August 2017 - 14

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FUZZY ON FIDUCIARY COMPLIANCE
Context and presentation are factors
A RECENT webinar presented by law
firm Goodwin Procter offered extensive
analysis of the ongoing implementation
of the Department of Labor
(DOL) fiduciary rule, which has greatly
expanded the definition of fiduciary
investment advice under the Employee
Retirement Income Security Act
(ERISA).
According to a team of Goodwin
ERISA attorneys, the key to understanding
the ongoing change is to
grasp the difference between the old
" five-part test " formerly used to determine
fiduciary status, and the new
blanket approach. Stated simply, the
advisory industry is moving from an
environment where firms typically
could find a way to cite the five-part
test in order to deny fiduciary liability,
to one where practically anyone
offering advice for compensation to
retirement investors-including those
purchasing products in individual
retirement
accounts
(IRAs)-will
immediately be deemed a fiduciary.
According to the attorneys, in
the last 10 years or so, the DOL had
grown " incredibly frustrated " with the
way its granular guidance about the
five-part test, which it issued to help
Today the industry
is left in a somewhat
confusing spot, given
that an anti-regulation
Republican is in the
White House.
providers understand when they were
acting as fiduciaries, was being aggressively
used to undermine its otherwise
broad-based policing authority
of qualified retirement plans. That
frustration strongly fueled the effort
under the last Democratic presidential
administration to establish a far
stricter and more direct definition of
fiduciary advice under ERISA.
Today the industry is
left
in a
somewhat confusing spot, given that
an anti-regulation Republican is in the
White House and in command of the
agency supposed to enforce the new
fiduciary rule-a rule still not even
fully in effect, as the applicability
dates for various provisions stretch
well into 2018.
Therefore, the Goodwin attorneys
urged advisers to continue to track the
outstanding memoranda from President
Donald Trump, instructing a full
review of the fiduciary regulations and
exemptions. The fiduciary rulemaking
could still be withdrawn or clarified in
a substantial way, they warned. As one
attorney said, " It is not unreasonable,
in our mind, to be hedging between
different approaches right now, in
terms of thinking about abandoning
commission or moving down another
path. As we have stressed, much of
this is still subject to change. "
The attorneys suggested they are
particularly interested to see how the
" transition best interest contract (BIC) "
period plays out. Right now, under
the fiduciary rule transition period,
advisers to retirement accounts are
fiduciaries, and they have to comply
with the impartial conduct standards
set forth by ERISA; however,
they do not yet have to paper individual
contracts to this effect with all
of their clients. This is important in
cases where the advisory practice is
continuing to assess compensation via
commissions rather than flat fees for
service. -John Manganaro
14 | planadviser.com july-august 2017 Art by Lisk Feng
http://www.planadviser.com
PLANADVISER - July/August 2017

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