Uniform Fiduciary Standard Revisited

Not surprisingly, The Department of Labor (DOL) plans to re-propose its rule to amend the definition of fiduciary under ERISA within several months.  Phyllis Borzi told Advisor One on Dec. 7. that the DOL “is not finished” with the rule, and went on to say that agency officials are addressing many of the legitimate issues that were raised in the comment process. She further indicated that the re-proposed definition of a fiduciary will be better, clearer, more targeted and more reasonably balanced.

Borzi’s view is that, “We are facing a crisis of confidence and people need help.” Those who “need help and want help need to understand that the people who hold themselves out as experts are accountable to them, and in fact, exercise the standard of care that consumers think they are getting and deserve to get.”

The only thing surprising about this, in this author's opinion, is that it didn't happen quicker.  Many studies show that investors, in general, are incapable of distinguishing between broker-dealers and investment advisors and are confused (if they are even aware) about the differences between the legal standards that registered reps and investment advisor representatives are subject to.  Nowhere is this more the case than in Retirement Plans which benefit all eligible employees, regardless of income or sophistication level. 

Many financial advisors target upper middle class and wealthy individuals for their private practices. The majority of employees covered by retirement plans are not upper middle class or wealthy.  As a result of this disconnect, it is often the case that covered employees have never had access to financial advice previous to what they receive from their Retirement Plan advisor.  Therefore, the need for retirement plan advisors to be held accountable to the 'Exclusive Purpose' rule has never been greater.  That rule requires that advisors exclusively act solely in the best interest of the participants. 

It will be interesting to see how this all plays out.  More to come in the months ahead.