3982 / Who is a fiduciary for purposes of the prohibited transaction rules?
The definition of investment advice fiduciary continues to change. Under the 2024 rule, a financial services professional is classified as an investment advice fiduciary if (1) the provider offers investment advice or makes investment recommendations to a retirement investor, (2) the advice or recommendation is made for a fee or other compensation and (3) the financial services provider either specifically states that they are acting as an investment advice fiduciary or makes the recommendation within a professional relationship in which an investor would reasonably expect to receive sound investment recommendations that are in their best interest. See Q for a detailed explanation.
Historically, a fiduciary has been a person who has discretionary authority or control over plan management or administration or disposition of plan assets, or who renders investment advice for a fee or other compensation, direct or indirect, with respect to any money or other property of the plan.1
A person renders investment advice if advising trustees as to the value of property or making recommendations about the advisability of buying or selling property and, directly or indirectly (1) has discretionary authority with respect to buying or selling property, or (2) renders advice on a regular basis to the plan, pursuant to a mutual understanding that (x) the services will be the primary basis for investment decisions, and (y) he or she will render individualized advice regarding investment policies.2 Whether advice and recommendations regarding plan purchases of insurance contracts and annuities constitute investment advice depends on the facts in each situation.3 A fee or other compensation can include insurance sales commissions.