DOL issues guidance on new fiduciary rule

Ary Rosenbaum
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Ary Rosenbaum - The Rosenbaum Law Firm P.C.

The Department of Labor (DOL) issued guidance that reinforces that the new investment advice regulation in retirement accounts will strengthen oversight of rollover recommendations and require investment advisers to mitigate conflicts of interest.

The regulation that the Biden administration let stand that the Trump administration issued, provides exemptions under ERISA that allow fiduciaries to receive compensation for advice that would otherwise be prohibited, such as third-party payments, as long as they act in a retirement savers’ best interests.

The DOL in the guidance said that a recommendation to roll over retirement funds from a retirement plan to an IRA can be part of an ongoing client-advisor relationship and trigger a fiduciary standard of care.

The new rule does leave in the five-part fiduciary test that allows wiggle room for financial advisers to get around a fiduciary obligation. However, the DOL stated that will be monitoring rollovers for potential investor harm.

The DOL guidance also stated how retirement-plan advisers should handle potential conflicts of interest that would put the advisers’ interests ahead of those of the client. The DOL opines that financial firms should not use quotas, bonuses, prizes, or performance standards as incentives and tells them to avoid compensation practices that encourage conflicts.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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