The Retirement Security Rule

On April 23, the DOL made its fourth attempt since 2010 to expand investment advice fiduciary status by issuing the Retirement Security Rule. Under the new rule, which replaces the five-part test, a person is an investment advice fiduciary if they provide a recommendation in one of the following contexts:

The person either directly or indirectly (e.g., through or together with any affiliate) makes professional investment recommendations to investors on a regular basis as part of their business and the recommendation is made under circumstances that would indicate to a reasonable investor in like circumstances that the recommendation: (1) is based on review of the retirement investor's particular needs or individual circumstances, (2) reflects the application of professional or expert judgment to the retirement investor's particular needs or individual circumstances, and (3) may be relied upon by the retirement investor as intended to advance the retirement investor's best interest; or
The person represents or acknowledges that they are acting as a fiduciary under ERISA, or both with respect to the recommendation. The recommendation also must be provided "for a fee or other compensation, direct or indirect" as defined in the final rule.

The Retirement Security Rule also amended prohibited transaction class exemptions. In doing so, the rule requires that fiduciaries who want to accept compensation that would otherwise be prohibited must avoid conflicts or comply with certain exemptions. In other words, financial professionals who hold themselves out as providing individualized recommendations will be held as fiduciaries and will have to give "prudent, loyal, honest advice free from overcharges," according to the DOL.

Instant Insights /

DOL's new fiduciary rule: Already under fire from life insurance & annuity industry groups

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