On April 6 of last year, when the U.S. Department of Labor (DOL) released its final rules outlining new responsibilities for RIAs who recommend rollovers from qualified plans to IRAs, it moved a number of practitioners into unfamiliar territory.
Commission-compensated advisors had to deal with the imposition of an ERISA-like fiduciary standard on areas that had formerly been governed by suitability rules. Suddenly, they had to show that they were acting in the best interests of clients when making recommendations regarding rollovers from 401(k) plans to IRAs. Meanwhile, fee-compensated RIAs had to pledge in writing that they would act as a fiduciary in these transactions, and also document the process by which they determined that clients would be better off in the rollover IRA than if they stayed in the plan.
The DOL rule has set off a veritable cottage industry of tools to help advisors and financial planners cope with the additional analysis and reporting requirements. This article, the first of two parts, is a review of some of the more prominent new tools that advisors can lean on as they prepare for the full DOL rule implementation on April 10. Each of them addresses a different aspect of the rule, and they all approach it from different angles.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
Before we get to the tools, the first question is: Will the DOL rule even exist on April 10, given the expressed hostility by many Republicans who now control the presidency and both houses of Congress?
The consensus among the tool providers is that the rule will persist in some form. Initially, RIAs may have to comply with the full version. Then if, as is likely, the rule is modified or overturned, it will leave behind an expectation among consumers that advisors will act in their best interests.
The best practice for all advisors is to continue to follow the basic outlines of the rule, and show that they’re acting as a fiduciary when they make rollover recommendations.
“The president-elect will start his administration at the start of February,” points out Raef Lee, managing director at SEI, Inc. in Oaks, PA. “Our take is that he would have to move an awful lot of things, and put this issue way up in his front burner, to get everything changed by April.”
“If Congress or the DOL doesn’t give any contrary guidance by the end of January, it’s too late,” says RiXtrema President Daniel Satchkov. “By that time, everybody will have changed their systems and gotten geared up for compliance.”
Meanwhile, the fiduciary standard has become too widely known to put back in the bottle. “Did you see the John Oliver spoof on this?” says Lee. “We think that if or when the DOL rule is dismantled, the popular press will start to engage in this topic. You’re already seeing Money magazine and others starting to talk about it. Our advice to advisors,” Lee continues, “is: The steps you take to comply with the rule are good things to do anyway, so get ready for a fiduciary future, even if you may not have to do these things legally.”
By Bob Veres, read the full article here.