Fred Reish Explains Strategies for Firms Working With New DOL Rule for Financial Advisor

In the Financial Advisor article, “Firms Still Trying to Figure Out DOL Rule’s Fiduciary Exceptions, Attorney Says,” benefits and executive compensation partner Fred Reish explained how investment and insurance firms are planning new strategies due to the Department of Labor’s (DOL) Retirement Security Rule. 

The rule, set to become effective Sept. 23, redefines financial and legal services as fiduciary in nature, ensuring the client’s best interests are prioritized. The rule also creates a “one-time advice” caveat that triggers fiduciary responsibility, and extends fiduciary standards to anyone selling investment advice, including insurance agents and brokers. 

Reish explained that many firms are testing whether exceptions to the rule, primarily through a “hire me,” “education,” or “unsolicited” approach will trigger the rule. He said that firms and their advisors may find it difficult to stick to any one or all of these workarounds. 

“I believe that firms are still considering how to approach the rule and it will vary depending on the type of financial institution,” he said. “For example, some smaller broker-dealers and investment advisers have been using the education approach and I think that, for now, they will continue to do so. However, the one-time recommendation fiduciary definition will make it harder to stick to an educational approach."

While the DOL explicitly states that advice for educational purposes does not trigger the rule, it did significantly tighten the way investment advisors must report their materials and advise to the Department. Reish said firms should have proper training and documentation practices in place to avoid triggering the rule when it comes to advice categorized as “educational.”