DOL Fiduciary Redraft Will Be Changed, Top Official Says

Lombard, like other critics, took issue with the redraft's Best Interest Contract Exemption, or BICE, which he said Janney has "no intention of utilizing" as currently laid out.

BICE, Lombard argued, would not only "impose new legal liabilities for firms who utilize it," but it's impossible to discern what's "permissible and not" as the exemption is currently written. Janney, he continued, would also have to "revise our advisor compensation model" under BICE.

Hauser said the "fundamental idea" behind BICE is that if a broker/advisor chooses to give advice in an environment where they may receive compensation that "may skew that advice, you have to execute a contract upfront." Exactly when that contract must be signed remains a sticking point among critics.

Barbara Roper, director of investor protection at the Consumer Federation of America, who chairs the committee's Investor as Purchaser Subcommittee, said that while the DOL's rule is much further along in its fiduciary rulemaking, the Securities and Exchange Commission's staff "is hard at work" on its fiduciary rule.

While their jurisdictions differ, Roper added that both DOL and the SEC are grappling with the same problems as they craft their fiduciary rulemakings. "How exactly do you apply a fiduciary duty to a sales based advisor? How do you make the best interest standard real in a business model that is laden with conflicts of interest? How do you apply the standard in certain areas with regard to sales of a limited number of products?"

Industry trade groups like the Securities Industry and Financial Markets Association and the Financial Services Roundtable have proposed their own best interest standards to mitigate what they see as potentially conflicting fiduciary rules to be issued by DOL and SEC. Trade groups are also working on a bill that would legislate a best-interest standard.

– Related on ThinkAdvisor: DOL Fiduciary Foes Said to Be Writing Best-Interest Standard Bill