You wanted that piece of cake. It looked delicious. But when you took a bite, the flavor was not entirely what you expected. That, according to a recent report, is the experience of some who have availed themselves of adjustments the Department of Labor has made to its final fiduciary rule — they sounded great, but the execution left something to be desired.
According to a recent InvestmentNews post, higher revenue allowances and other adjustments such as those concerning use of product revenue, the grandfathering of pre-existing investment advice and advisers’ ability to market their services without becoming a fiduciary are all proving to not be a panacea.
Ensuring there is no conflict of interest is proving to be difficult for advisors that use product revenue within the Best Interest Contract Exemption (BICE), according to the report, which cites Fidelity Clearing & Custody Solutions’ VP and COO Tom Corra as noting that demonstrating that there is no conflict in such a case is “a challenge.”
Grandfathering advice provided before the rule’s applicability date also has turned out to be more complicated than expected. For example, a BICE will need to be in place if there already is a systematic investment plan and the investor increases the amount going in to it; however, Corra says it is unclear when that would happen. And Matt Matrisian, AssetMark’s SVP of Strategic Initiatives, told InvestmentNews that in his view any interaction with such clients about their investments probably would trigger a fiduciary action and require either a BICE or switching to a level-fee account.
And allowing advisers to market their own services without being considered a fiduciary is “difficult to implement,” according to Matrisian. Part of the problem is that if conversations about those services incorporate what to do with assets, the discussion is not just marketing but also includes recommendations.
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