Should The Biden Administration Start Over With Fiduciary Advice?
Written by Jasmin Sethi and published in Forbes.
The release of the recent DOL fiduciary proposal is another step in what has been a long, challenge-ridden saga for improving investor protections around retirement advice. The Obama Administration recognized in 2015 that Americans lost $17 billion in fees when they rolled over from 401(k) plans to IRAs. This finding justified the 2016 DOL fiduciary rule, which was finalized after a long process that began in 2010. The rule would have protected investors making rollovers from their DC plans to IRAs by making all IRA advice providers fiduciaries, putting pressure on firms to change compensation structures for advice providers, and incentivizing advice to steer most individuals towards lower cost products, such as index mutual funds. The rule was vacated by the Fifth Circuit in 2018, reinstating the previous five-part investment advice fiduciary test, which did not cover rollovers according to the DOL’s guidance as expressed in the Deseret Letter.
And now if the proposed DOL rule becomes final, IRA advice, including on rollovers, could also sometimes be governed by the investment advice fiduciary standard in the proposed rule, which is similar to the Reg BI standard, though the DOL throws in some ERISA language to this standard while saying it is aligning the standard with Reg BI.
