After years of discussion, the Department of Labor proposed a new rule altering the long-standing fiduciary standard. Controversial from their start in 2010, these new regulations have been framed as a way to help the middle-class avoid excessive fees and poor advice from financial professionals who do not already serve as a fiduciary.

Under the current law, non-fiduciaries are not liable to steer clients toward the options that are truly best and are able to instead advise clients in a way that will profit themselves more. As a way to deter this practice and help the middle-class, the new ruling states that financial professionals including, brokers, registered investment advisors, insurance agents and others with retirement accounts, will have to act within the best interest of their clients, not themselves.

Labor Secretary Thomas Perez did make the point that this widened fiduciary definition would also come along with a list of prohibited transaction exemptions so that new fiduciaries would be able to still receive compensation through 12b-1 fees and commissions, as long as proper disclosures are made. What this means in terms of advisor compensation is that they will also not be able to accept any payments that could create conflicts of interest, such as fees earned for recommending certain financial products, without entering into an exemption contract.

As an exclusively fiduciary advisory firm, we believe that finally creating a fiduciary standard is long overdue. Giving financial advice to people is an important responsibility and should be not be taken lightly, especially when you consider the fact that most Americans are not on track to have enough money to retire with dignity.


We are excited that the ruling will require more investment professionals to act under the appropriate umbrella of fiduciary liability. With that said, while we always keep our clients best interests in mind, we do question whether this new ruling will help or hurt when it comes to people receiving the financial guidance they need. For instance, many company sponsored retirement plan advisors also handle 401(k) plan rollovers on a regular basis.

This new ruling could put a stop to those advisors' ability to assist people with this since, as it is currently written, any fee differential involved with an IRA rollover will prohibit the advisor from working with investors, even if they are advocating in the client’s best interest. This forces people to seek out a new provider they don’t know and may not trust, which could result in them choosing a more expensive investment product.  

AFS 401(k) advisor Daniel Haverkos states, “We wholeheartedly support the concept of this ruling, which will inevitably encourage more advisors to work under the fiduciary standard, in a similar fashion that our firm has for the past decade. Our concern lies in the facts that the unintended consequence of preventing company sponsored retirement plan advisors from acting in a similar fiduciary capacity for employees who retire or roll money out of their company’s 401(k) plan may end up being much more harm than good for the average investor.”

Our concern is that certain provisions in these updated regulations may limit the scope of advisory practices by hindering our ability to give advice over the course of one’s entire life span as well as possibly reducing the advisory services that can be provided to small businesses and their retirement plans.

What are the next steps? The rule will undergo a 75-day comment period after which, the DoL will host a public hearing within 30 days of that comment period ending. After feedback is processed, there is a possibility that the proposed changes will be modified, but it is not clear when this process will be completed.

As retirement advisors, we feel that the idea behind these new fiduciary regulations is in the right place, but we need to continue to advocate for greater transparency, not more barriers that could prohibit people from receiving financial help that they desperately need.

Alex Assaley is lead adviser, retirement plans, with AFS 401(k) Retirement Services LLC in Bethesda, Maryland.

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