“Today, I'm calling on the Department of Labor to update the rules and requirements that retirement advisors put the best interests of their clients above their own financial interests. It's a very simple principle: You want to give financial advice, you've got to put your client's interests first.” —President Barack Obama, Feb. 23, 2015

Last week, after years of proposed regulations, comments and revisions, the Department of Labor (DOL) sent the final version of the proposed fiduciary rule to the Office of Management and Budget (OMB) for review and provided a formal notice of submission. The rules call for the OMB to accept or reject the rule within 90 days—a timeframe it will undoubtedly accept given President Obama’s support. 

The proposed rules could have a profound impact on investment professionals, depending on the scope of the services they provide. According to these proposed regulations, a person renders investment advice by: 1) providing investment or investment management recommendations or appraisals to an employee benefit plan, a plan fiduciary, participant or beneficiary, or an IRA owner or fiduciary; and 2) either a) acknowledging the fiduciary nature of the advice, or b) acting pursuant to an agreement, arrangement or understanding with the advice recipient that the advice is individualized to, or specifically directed to, the recipient for consideration in making investment or management decisions regarding plan assets.

When such advice is provided for a fee or other compensation—direct or indirect—the person giving the advice is a fiduciary. Currently, registered reps are held to a “suitability” standard, not a fiduciary standard.

Congress has taken action to create a more inclusive legislative approach. This week, the Big “I” applauded the U.S. House of Representatives Education and Workforce Committee for passing H.R. 4294, the “Strengthening Access to Valuable Education and Retirement Support Act,” spearheaded by Rep. Peter Roskam (R-Illinois), and H.R. 4293, the “Affordable Retirement Advice Protection Act,” led by Rep. Phil Roe (R-Tennessee). The bills help ensure that the investment marketplace will continue to be widely available and affordable to all types of investors.

"As currently structured, the rule being promulgated by the DOL promises to create undue compliance burdens and increased liability for the Big ‘I’s’ small business membership,” says Charles Symington, Big “I” senior vice president of external and government affairs. “This will increase costs for many consumers and restrict access to quality investment advice for those most in need."

The bills would prohibit the DOL from amending the current fiduciary investment advice definition without congressional approval. Both bills would establish a “best interest” standard for investment advice and would adopt elements of the current DOL proposal, but with a number of necessary modifications. Each would also enable advisors to sell proprietary products, so long as they disclose that activity to their clients.

Independent agencies that provide investment-related services should conduct an introspective review of how they provide these services and whether they will need to change their approach or the nature of their compensation in order to ensure compliance. The proposed regulations are likely forthcoming, and agents should be prepared to address their impact.

Dave Evans is a certified financial planner and an IA contributor.