Family Wealth Report continues to follow developments and reactions after last week's fiduciary ruling.

Last week the US Department of Labor said it is finalizing a long-anticipated rule - and exemptions - to ensure that investment advice received by retirement savers is always in their best interest, or of a “fiduciary” standard. For more about the issue, click here. Here is a selection of comments from various corners of the industry that emerged in the following days.

Family Wealth Report doesn't necessarily agree with any of the views stated here, but is pleased to share them and welcomes reader feedback.

LPL Financial

“Upon initial review of the Department of Labor fiduciary rule, LPL Financial is pleased by what appears to be positive changes implemented in the rule and appreciates the Department of Labor's willingness to listen to concerns about protecting choice for investors. In particular, we are encouraged by the increased time frame for implementation, the ability to easily enter into the Best Interest Contract with our existing clients, and the freedom to recommend any assets that are appropriate to help investors save for retirement.

“While our review is still in progress, with the rule in hand, we now have greater clarity and can begin quickly implementing solutions that will help investors retain access to the objective financial guidance they need. As a result of LPL's preparation over the past year, the firm has already announced several changes to position LPL and its advisors for growth by offering choice and flexibility to serve a range of investors seeking both ongoing and occasional advice. We look forward to introducing additional capabilities over time that will empower LPL advisors to support even more investors with this fundamental need.”

OCC, the global equity derivatives clearing organization and a leader of the US Securities Markets Coalition

“OCC and the Securities Markets Coalition are studying the Labor Department’s new fiduciary rule as it relates to the use of listed options,” said Craig Donohue, OCC's executive chairman. “We are gratified that the Department’s final rule appropriately moved away from limiting the ability of investors to hold listed options in their retirement accounts. Providing individuals with the right risk management tools to help them save for their own retirement is now more important than ever.

“However, we are concerned that the final rule may limit the ability of brokers to provide education regarding listed options to self-directed investors. Investor education is exactly what is needed in order to promote responsible and prudent use of listed options by investors. We will continue to study the rule, and if appropriate, continue to fight aggressively on behalf of investors who use listed options in their retirement accounts. We also thank those members of Congress who supported us through this process.”

Roger Ferguson, president and chief executive of the US financial services giant TIAA

“Putting the customer first is a core TIAA value, and we believe adhering to a best interest standard under the Department’s new regulation is an important way to help more people build financial well-being. IRAs are a key part of creating retirement security, so we agree with the requirement that distribution advice be subject to the same fiduciary standard as all other investment advice. This will ensure that rollover discussions, including whether to roll over from an employer-sponsored plan to an IRA, are always in employees’ and retirees’ best interest. Based on our preliminary analysis, it appears the Department has gone a long way toward making the best interest standard the industry standard. TIAA supports this direction, and we look forward to reviewing the full rule.”

Josh Nelson, founder and CEO of Keystone Financial Services in Loveland, CO

“The DoL fiduciary rule was long-anticipated and I think it is a step in the right direction. The average consumer assumes that their financial advisor is looking out for their best interest, but until now they were not always required to do so [...] Clients of financial advisors deserve the transparency and accountability that the DoL rule mandates. The fiduciary status is good for investors and any advisors in our industry that are committed to serving clients with the highest standard.”

Stewart Massey, chief investment strategist and founding parter at Massey Quick

“Wednesday’s ruling was a good start and a victory for investors, but more could have been accomplished. The most important thing that this bill does is create an awareness among investors on who is really giving them advice - is their advisor a fiduciary or does their advisor provide guidance under the suitability standard which is not as favorable to investors. And while this only effects retirement assets, this new awareness will cause people to question they type of advice they are receiving, not only on their retirement assets, but all investments.

“The DoL has taken away the ability for brokers to sell funds with large embedded, hidden fees that have a higher profitability for the large firms that are selling them - even though they may not be the right fund for the investor. When we talk to potential clients, we have long stressed putting client’s interests first as a fiduciary, compared to others that adhere to the suitability standard. Going forward, our distinction as a fiduciary will resonate more profoundly with investors.”

Terry Dunne of Millennium Trust Company:

What will be the effect on the market for financial advice?

The impact will be significant and complex. First, advisors have to figure out the changes they are required to make. Then they will have to implement changes to their technology and create training. They will need to inform clients and prospects how they are dealing with the requirements.

We believe the time frame for required compliance is too short to fully comply with the BICE requirements. Highly controversial are requirements around the BICE agreement which now includes multiple BICE documents and is likely to create significant confusion. Investors will be able to hold advisors accountable either through a breach of contract claim for IRAs and non-ERISA plans or under the provisions of ERISA for ERISA plans and their participants.

There is a need in America for more advice, guidance and education.  The DoL is not trying to eliminate the use of advisors; rather its goal is to make sure advisors’ recommendations are focused on an individual’s best interests. Most advisors offer excellent advice to individuals and plan sponsors who benefit from their knowledge. 

Who doesn't follow the fiduciary rule?

Everyone who provides investment advice or recommendations to individuals and plan sponsors must follow the new fiduciary rule. The new rule does have some modest carve outs (exemptions), for example for advisors offering recommendations to plan sponsors with asset values greater than $50 million and recommendations on fixed-rate annuity contracts. Another example would be advisors or institutions that are not offering investment advice, but rather general communications that a reasonable person would not view as an investment recommendation.

The SEC supposedly is working on its own version of the fiduciary rule. What's the status of that?

The SEC opposed the DoL’s comprehensive attempt to alter the fiduciary standard.  They may have made some progress internally, but like every other organization involved, the SEC wanted to see what the DoL was going to finally create before it makes its move.  They would have learned a great deal from the DoL's efforts and the 3,000 submitted comments.

How is this different than the DoL’s rule?

Time will tell. No one knows yet.