Full implementation of the fiduciary rule may be delayed until 2019, according to an expert in ERISA law.

Although the current transition period for advisors to fully comply with the rule, which went into effect June 9, Bruce Ashton, an ERISA specialist and attorney for Drinker Biddle in Los Angeles, said he expects the Department of Labor to extend the transition timeframe past the end of the year.

“The department will most likely look at modifications, which have to go through the regulatory process,” Ashton said, speaking as a panelist on Financial Planning’s webinar, “Fiduciary Rule Best Practices.”

There will be a 60-day comment period after the Labor Department submits the revised regulation, and new rules won’t go into effect until after they become final, he noted. “I’m guessing it will take around 12 months, and there may be another transition period after that for firms to react and come into compliance,” Ashton said.

BIG CHANGES IN BICE COMING?
While he doesn’t expect the rule to change “very much,” Ashton does think a modified rule could include a sales exemption, as well as changes in the best interest contract exemption, or BICE.

(Bloomberg News)
(Bloomberg News)

The DoL may eliminate current BICE requirements that call for disclosures by firms on their website and a contract with clients, Ashton speculated, as well as constraints on advisor compensation.

What’s more, one of the fiduciary rule’s most controversial provisions, the ability of clients to purse class action lawsuits against advisers, “may also go away,” Ashton said.

The webinar’s other panelist, Ed Gjertsen, vice president of Mack Investment Securities and former national chairman of the FPA, strongly defended the Department of Labor.

‘WHAT SERVICES DO YOU OFFER?’
He cited the department’s lengthy public hearings on the fiduciary rule and its attention to comments and feedback from the industry. “They really tried hard to get it right,” Gjertsen said, describing the final result as “outstanding.”

Gjertsen also expressed annoyance at the characterization of the rule as simply an effort to push consumers to low-cost index funds. “The DoL was not striving for a lowest-cost provider [for retirement funds],” he said. “They want consumers to ask firms ‘What services do you offer?’”

Both Ashton and Gjertsen agreed that, even with potential delays and modifications, the fiduciary rule is here to stay.

Gjertsen urged advisers to incorporate financial planning into their practice and Ashton stressed the importance of documentation once the rule fully takes effect.

“Maintain records,” Ashton said. “You want to be able to document your analysis and why you made the recommendations that you did.”