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Expert Opinions on the DOL Fiduciary Regulation

Four of the nation’s leading ERISA legal experts — former Assistant Secretary of Labor Brad Campbell (now with Drinker Biddle & Reath), Groom Law’s David Levine, Marcia Wagner of the Wagner Law Group, and Fred Reish of Drinker Biddle & Reath — weigh in on the DOL’s fiduciary regulation and its impact(s).

Though we’ve had the final regulations to study for some time now, advisors, consultants, home office staff and the legal community are still scrutinizing the text to evaluate its impact on business practices, compliance requirements, and revenue structures. Here’s the take of these ERISA experts:

What were you most pleased to find in the final regulation?

Campbell: While “pleased” is not the word I would use to describe my reaction to the final rule, the most useful addition is the Level Fee Option in the BIC Exemption, despite the limits on its application.

Wagner: The inclusion of the negative consent BIC, the ability to grandfather old accounts, and the elimination of the most onerous disclosure rules.

Levine: The inclusion of the level fee “BIC Lite” exemption like the American Retirement Association’s level-to-level proposed exemption and the simplification of the BIC disclosures. These changes make the BIC a more workable (although not without challenges) solution.

Reish: The most important change, and the one that I felt was most needed, was the simplification of the requirements for the Best Interest Contract Exemption (BICE). As drafted, the exemption would not have been workable, which would not have been in anyone’s best interest.

What were you most disappointed not to find there?

Wagner: Additional time. April 10, 2017 and Jan. 1, 2018 will not be enough time for some of the largest entities to respond.



Levine: More clarity and flexibility in the platform exception (formerly carve-out) to the definition of fiduciary. As advisors have taken on more roles and the lines between advisors, investment managers, and other service providers continue to blur, the concept of what is a “platform” becomes more important than ever.

Reish: I believe that the usefulness of the disclosures have been diminished by the fact that the financial disclosures are not required to be made in dollar amounts … for costs and compensation. At this time, though, it may not be possible. For example, the systems changes would have been very expensive and would have taken longer than the applicability dates allow. But, in due course, I hope that dollar amount disclosures are required for costs and compensation. That is, because, while percentage disclosures may be effective for plan sponsors, I think that there are a fairly large number of individual IRA investors who will not take the time to read all the materials that are given to them, to visit the website, to request additional disclosures, and then to do the calculations necessary to understand the impact.

Campbell: I was most disappointed (though not surprised) by the absence of a broad exclusion for sales activity. Much of the difficulty posed by the rule is that it runs counter to securities and insurance regulation. Rather than simply establishing a standard of care to govern proper sales conduct, the rule generally prohibits the sale of many affiliated products unless one complies with the onerous conditions and accepts the frivolous litigation risks presented by the BIC Exemption.