The department of labor has been attempting to create and enforce new conduct standards for investment professionals who recommend that their clients complete IRA rollovers for many years. The agency offered its original proposal in October of 2010. After more than a decade, the DOL is finally enforcing its long awaited Fiduciary Rule.
The DOL has not traditionally regulated financial advisors in a significant way. Rather, advisors have principally been regulated by the SEC since the 1930s. However, the DOL has regulated administration of 401K plans since the 1970s through authority granted to it by Congress under the Employee Retirement Income Security Act of 1974 (ERISA). The DOL promulgated the Fiduciary Rule via a significant expansion of this authority.
The new rule generally prohibits investment professionals from offering advice to clients about IRA rollovers. The DOL created the prohibition because an advisor will generate fee revenue from the client after the rollover, which, per the rule, is a conflict of interest. However, advisors may offer rollover advice under an exemption that requires them to adhere to a fiduciary standard that requires the advisor to: (1) act only in their client’s best interests; (2) make no materially misleading statements; (3) make certain disclosures, including a comparison of fees before and after the rollover; and (4) take a number of other steps to mitigate the conflict.
Financial advisors must now take all necessary steps to comply with the requirements of the DOL Fiduciary Rule, including us here at Trust Point. What this means is that when our clients rollover funds into an IRA at Trust Point, they will see a new rollover disclosure form.
This form may be new, even to Trust Point clients, however, unlike certain other types of investment professionals, Trust Point has always been regulated according to a fiduciary standard. This fiduciary standard has, and will continue to apply to all of our activities and services, not just rollover advice. Further, the fees we charge our clients have always been, and will continue to be transparent and fully disclosed. Simply stated, when we act on your behalf, we act in your best interest.
