U.S. Department of Labor finalizes rules redefining a fiduciary

U.S. Department of Labor redefines a fiduciary

The ruling by the U.S. Department of Labor has forced change in the way the financial industry delivers retirement-savings advice.

The ruling by the U.S. DOL has forced change in the way the financial industry delivers...

What is the rule?

The ruling by the U.S. Department of Labor has forced change in the way the financial industry delivers retirement-savings advice, and it expands the definition of an investment advice fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA). The rule also has changed the exemptions that until now were listed as part of the prohibited transaction exemptions for investment activities.

What does it do?

The rule requires that financial advisers act in the best interest of their clients when providing investment guidance. Until now, a recommendation by a broker was only required to be “suitable,” which proponents of the new rule suggested encouraged some sellers to not have the best interest of clients in mind. Rather, the proponents argued, sellers of investment products too often suggested clients purchase high-fee products that paid high commissions to brokers.

Who does it impact?

The rule, which is designed to benefit purchasers of products, could have a significant down-side impact on broker-dealers, investment advisers, insurance agents, and plan consultants who would be designated as fiduciaries to ERISA plans and individual retirement accounts.These advisers must either avoid receiving payments that create conflicts of interest or comply with the exemptions contained in the final rules, including:

  • Acknowledge the fiduciary status of the firm and its individual advisers;
  • Adhere to the basic standards of impartial conduct, including giving prudent advice that is in the best interest of the customer, avoiding misleading statements, and receiving no more than reasonable compensation;
  • Adopt policies and procedures designed to mitigate conflicts of interest; and
  • Disclose conflicts of interest and the cost of advice.

What KPMG can do for you?

KPMG can assist industry participants consider and address changes in the following areas:

  • Program Management
  • Strategic and Operational Impact Analyses
  • Exemption Implementation
  • Compensation Arrangements and Contracts
  • Customer Experience
  • Marketing Communications and Training
  • Business Process and Technology Change
  • Regulatory Compliance and Controls

KPMG is actively working to assist our clients in developing and implementing their strategic response to the DOL's voluminous and complex final fiduciary rules. We would be happy to discuss the 1,023-page Final Rules in more detail.

Connect with us

KPMG's new digital platform

KPMG's new digital platform

FS CoE

KPMG’s Financial Services Regulatory Centers of Excellence can provide insights into the implications of the raft of regulatory change.

 
Read more

Banking and Capital Markets

KPMG can help banks navigate the growth and revenue challenges affecting the sector today.

 
Read more

Insurance

KPMG's insurance professionals provide services to help insurers respond to disruption.

 
Read more

Regulatory Alert | April 2016

U.S. Department of Labor finalizes rules redefining a fiduciary for purposes of retirement investment advice...

 
Read more