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Aon Hewitt Retirement and Investment Blog

The U.S. DOL Fiduciary Rule…Delayed Again, But Which Provisions?

In our blog dated June 1, 2017, “The DOL Fiduciary Rule…Journey for Full Implementation is Set to Begin,” we indicated that Aon Hewitt Investment Consulting (AHIC) recognized the potential for further delay of full implementation of the “new rule” put forth by the U.S. Department of Labor (DOL), which requires an array of investment advice offerings to conform to a fiduciary standard.

The Obama administration created the rule in 2016 to help better manage conflicts of interest in the financial services sector with respect to recommendations that investors receive on retirement accounts. Full implementation of the rule was to be effective January 1, 2018.

On November 27, 2017, the DOL officially delayed the full implementation of the rule. 

What exactly is being delayed?  The provisions delayed until July 1, 2019 are about what advice providers must do for disclosures and contracts to comply with prohibited transaction exemption requirements. Despite the delay, it’s important to recognize that the Fiduciary Rule’s impartial conduct standards have been in effect since June 9, 2017.  Under the impartial conduct standards, the advisor must provide advice that is in the investor’s best interest, make no misleading representations, and charge only reasonable compensation.
 
What does this mean for advice providers who adopted the new fiduciary rule?  With this delay, the disclosure, warranty, and contract requirements of the Best Interest Contract Exemption (BICE) won’t go into effect for at least the next 19 months based on current estimates. It is also expected that advisors will potentially delay the adoption of conflict of interest policies and procedures. Some advocates of the BICE provision are worried that the delay may be the beginning of the end of the full implementation of the fiduciary protection.  The DOL, however, stated that it is developing a new, streamlined prohibited transaction exemption, which will require input from federal and state regulators, including the Securities and Exchange Commission (SEC). While the SEC has gone on record in the past to agree with the intention of the new rule, it was opposed to the approach and complexity originally developed by the DOL. This collaboration of sorts may result in more support from industry groups who have opposed the new rule in its original form.  

We will continue to monitor this story as it unfolds.  Please feel free to contact your consultant with any questions.

Sara Hakim is a Senior Investment Consultant in Aon Hewitt Investment Consulting, lead researcher for Aon’s national Managed Accounts Research Team, and is based in Norwalk, CT.  Bridget Steinhart is an Associate Partner in AHIC’s DC Plan Consulting team, leads AHIC’s Qualified Fiduciary Consulting team, and is based in St. Louis, MO.

Content prepared for U.S. subscribers, but available to interested subscribers of other regions.

The information contained above should be regarded as general information only. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of acting on this information, particularly in the context of your own objectives, financial situation and needs. Nothing in this document should be treated as an authoritative statement of the law on any particular issue or specific case. Use of, or reliance upon any information in this post is at your sole discretion. It should not be construed as legal, tax or investment advice. Please consult with your independent professional for any such advice. The information contained within this blog is given as of the date indicated and does not intend to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information since the date of publication, or any obligation to update or provide amendments after the original publication date. The blog content is intended for professional investors only.


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