Frequently Asked Questions

What does the DOL rule do?

Jan 9, 2017, 14:22 PM
The new fiduciary rule replaces a rule that had been on the books since 1975 to determine whether someone is a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA). The new rule significantly expands the universe of activities that would make someone a fiduciary under ERISA by treating almost any suggestion about investments as fiduciary advice.

Many common activities that have not traditionally been considered fiduciary in nature but would be under the new rule, including, for example, recommending or suggesting that a client:
  • Rollover all or part of their retirement savings from a 401(k) plan to an IRA account, or transfer all or part of their savings from one IRA to another.
  • Hire another person to provide investment advice or investment management services.
  • Transition from a commission-based brokerage account to a fee-based advisory account.

While the new rule clearly treats the activities listed above as fiduciary advice, the treatment of other types of activities is less certain. Here are a few examples of activities that potentially could make you a fiduciary under the new rule, depending on the circumstances:
  • Giving a mere factual description of the features of an investment product and explaining how the product can meet certain needs.
  • Providing examples of how particular investment products could be used to implement an individual’s asset allocation plan.
  • Counseling a recent retiree about his or her likely income replacement needs and the features available under various annuity products that could help meet those income replacement needs.
While some of these activities could qualify as education, certain variations might cross over into the category of recommendations and constitute fiduciary advice. Determinations about whether specific activities will make you a fiduciary under the DOL rule will be made by your firm.