Unlike the anxiety in certain corners of Wall Street, many RIAs awaited Fiduciary Day like a child anticipates Christmas morning. Yet when the Washington fanfare was over and we began to digest the Department of Labor’s regulations, I had to admit I was somewhat disappointed – like when, as a kid, I ran downstairs at daybreak one Christmas hoping to see a teal blue banana bike under the tree only to find a more sensible black Raleigh bicycle.

Don’t get me wrong: I applaud the Labor Department’s efforts and believe this is a significant step forward for our industry. I am thrilled that all financial advisors will be required to act in a client's best interest when giving retirement investment advice. And, as an RIA who has always embraced the fiduciary model, I believe that all the focus on the fiduciary rule will continue to distinguish firms like mine from the wirehouses in a compelling way.

Till now, when I tell prospective clients that, unlike brokers, RIAs have a fiduciary duty to always act in a client’s best interests, I am often met with stares of disbelief. Folks honestly can’t believe that our industry has operated for so long with a double standard that held brokers only to a suitability standard!

HAPPY, BUT A BIT LET DOWN

So where, like the practical but uncool bicycle, did the ruling disappoint, in my view?

While I appreciate that low cost does not always correlate to the best choice, cost is a key component of returns. The fact that advisors can still recommend proprietary products, variable annuities and equity-indexed annuities – some of the highest commission products available – is troubling. I left a wirehouse decades ago because I just couldn’t stomach the conflict inherent in being pushed to recommend proprietary products to clients.

Also, I’m no fan of the accommodation that allows fiduciary disclosures and fee disclosures to be posted on a brokerage firm’s website rather than handed to investors. This seems to open the door to a host of potential problems. Where will the disclosure be posted? Must brokers ensure and report that clients have read it? How often will disclosures need to be updated or revised?

More frustrating, the new disclosures and contract provisions don’t need to be in place until Jan. 1, 2018. I worry that the additional time that was granted means more time for legal challenges and the like.

As Schwab pointed out in a helpful email, the final rule means that, for the first time, recommendations to rollover a 401(k) plan to an IRA to be managed by an advisor will be considered investment advice under ERISA. Therefore, rollovers are subject to fiduciary obligations and "prohibited transaction" requirements if an advisor stands to make more money (such as a larger AUM fee) as the result of that advice.

Notably, however, the DoL seems to have taken the approach advocated by Schwab and others and created, on behalf of RIAs, a prohibited transaction exemption tailored to "level-fee fiduciaries." That should allow RIAs who charge a uniform asset-based fee to meet the requirements by providing additional disclosures and representations in their advisory contracts and brochures.

The best interest contract exemption also requires all retirement advisors to keep documentation that shows why a recommendation is in a client’s best interest. Might this mean more time getting to know a client and digging a little deeper into risk tolerance and long-term goals before offering a plan for a seemingly simple IRA rollover? I think so. But already, we wanted to offer our clients advice that is always in their best interests.