Page 33 - Investment Advisor - December 2023
P. 33
THe PlAyING FIelD
By Melanie Waddell
the 2 Biggest Fights Brewing over dol’s
new Fiduciary rule
The rollover changes are controversial, but the “single-biggest fight” will
come from insurance agents, a lawyer predicts.
ndustry officials have been poring drafted the rule’s preamble accordingly.
over the Labor Department’s new For instance, Labor points out “how
Ifiduciary rule since it was released their new proposals are aligned with the
on Oct. 31, and while there are many note- SEC’s Regulation Best Interest,” Slott
worthy aspects to the plan, its treatment explained. Reg BI “says a rollover rec-
of rollover advice and insurance agent ommendation is subject to the best-
status is catching the most attention. interest standard of care.”
One of the most glaring parts is that Tim Hauser, associate solicitor at
Labor’s new fiduciary proposal, the Labor’s Employee Benefits Security
Retirement Security Rule: Definition Administration, stated at a recent event
of an Investment Advice Fiduciary, that Labor’s goal was to “significantly”
“makes a single recommendation a align Labor’s new fiduciary rule with
fiduciary recommendation,” ERISA Reg BI.
attorney Fred Reish of Faegre Drinker Labor “felt like to the extent advi-
told me in a recent interview. “That is sors in this marketplace were making a
The DOL’s new fiduciary particularly important regarding roll- strong, good-faith effort to comply with
what Reg BI requires, they ought to be in
over recommendations.”
definition “is based on This aspect of the new rule will be good shape” in complying with Labor’s
a fiduciary having a challenged in court, Reish and others, new fiduciary rule, Hauser said at the
including Ed Slott of Ed Slott & Co., pre-
American Law Institute’s life insurance
relationship of trust dict. As Slott told me, “Yes, it’s a single products conference in Washington.
DOL also points out that its new fidu-
and confidence with the rollover, but it also may be the single ciary definition “is based on a fiduciary
largest financial transaction a client has
investor, [and] that is ever made — it’s their life savings on that having a relationship of trust and confi-
exactly out of the [U.S. advisor doing what’s in their best inter- dence with the investor,” Reish contin-
ued, and “that is exactly out of the [U.S.
est. And it often doesn’t happen again.”
Court of Appeals] Fifth Slott agreed that the single recom- Court of Appeals] Fifth Circuit decision”
Circuit decision” mendation requirement will likely spark that torpedoed Labor’s 2016 rule.
The Fifth Circuit decision, Reish
a lawsuit and that “it’s overregulation
that torpedoed Labor’s and it hurts the advisors that are doing explained, said that “it takes a relation-
2016 rule. the right thing already.” That being said, ship of trust and confidence to have a
“financial advisors should be doing this fiduciary” arrangement. “Short of that,
—Fred Reish anyway with such a large financial move you’re not in a fiduciary relationship,
the client is making,” Slott continued. you’re in a sales relationship.”
“Often this rollover amount is larger
than the purchase of their home.” ‘reGUlAr BAsIs’ And
Labor, he has said, “is putting roll- one-tIMe AdvICe
over advice right up there with invest- Attorneys at K&L Gates agreed in a
ment advice.” recent alert that Labor’s plan will face
Yet the DOL has anticipated poten- challenges from the industry and in the
tial lawsuits, Reish relayed, and has courts. The proposed rule would replace
December 2023 Investment AdvIsor 31
