DOL Releases Fiduciary Rule FAQ for Investors, Workers

EBSA's answer: "Yes. Although many advisors already work hard to give sound advice that puts the customer first, the new rule will generally make best interest advice the law. Also, the rule will require many financial institutions to significantly change their compensation practices. The financial services industry will not be permitted to use incentives such as quotas, bonuses or prizes that encourage advisers to make recommendations that are not in your interest."

Another question asks: I have been told that the rule and exemptions will prevent me from receiving advice paid for with commissions, and will instead require me to receive advice paid for with an ongoing asset-based fee. Is this true?

EBSA's Answer. "No. The rule permits firms and advisors to give advice under a wide variety of compensation arrangements, including commissions. As a result, there is nothing in the rule or exemptions that requires advisors to move clients from commission-based accounts to accounts that are charged an ongoing asset-based fee." Another consumer's query asked: My financial advisor says he must switch my IRA from a "non-advisory" account where I currently pay commissions for each transaction to an "advisory" account for which I will pay an annual fee based on the assets in my IRA. Do the rule and exemptions require this change?

EBSA's Answer: "No, there is no requirement in the rule or exemptions that your financial advisor must charge you an asset-based fee. Your financial advisor may charge you a commission or other transaction fee, an asset-based fee, or an hourly fee, or your financial advisor may receive a payment from the provider of an investment product, so long as the advisor complies with the applicable rules regarding any conflicted payments. In fact, the exemptions flexibly accommodate a wide range of compensation practices, including commission-based accounts, while minimizing the harmful impact of conflicts of interest on the quality of advice."

The FAQ comes just days after the U.S. Chamber of Commerce warned that Labor's fiduciary rule could be halted "within days" of the new administration through action taken by a new Labor chief, instructions from the White House, or pending court cases.

(Read the rest of the 30 questions in the FAQ here.)

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• DOL Fiduciary Rule Could Be Halted 'Within Days' of Inauguration
• Congressman Introduces Bill to Delay DOL Fiduciary Rule