The Department of Labor released its final “Retirement Security Rule” recently, which aims to raise the legal bar for financial advisors, brokers, insurance agents and others who give retirement investment advice.

Noted ERISA attorney Fred Reish Esquire, Partner at Faegre Drinker, shares his thoughts on some of the rule’s key focuses and changes, along with implementation questions and potential hurdles to the rule becoming effective in September.

Key Insights:

1. Clarification of "Retirement Investment Advice": The updated Retirement Security Rule defines advice that is fiduciary in nature, emphasizing that even one-time advice must prioritize the investor's best interests. This redefinition aims to reinforce the legal and ethical duty advisors hold toward their clients. The new retirement security rule's implementation, scheduled for September 2024 with additional requirements phasing in by 2025, is set to introduce new compliance standards, enhancing overall financial advisory practices.
2. New Protocols for IRA Rollovers: Advisors must now perform a thorough analysis to ensure recommendations, particularly concerning IRA rollovers, align strictly with the client’s best interests. This includes comparing costs and services between the existing plan and any proposed IRA, a process that could challenge particularly those less familiar with stringent regulatory frameworks, such as independent insurance agents.
3. Impact and Industry Response: While wealth management firms may find adapting to the new standards more straightforward due to previous regulatory experiences, independent insurance agents are anticipated to face significant hurdles. The industry’s reaction is mixed, with some viewing the compliance requirements as burdensome, yet the overall sentiment recognizes the new Retirement Security Rule as a crucial step towards ensuring client interests are foremost.

SEE ALSO:

• DOL Fiduciary Rule Hit With First Lawsuit
• Breaking Down the Basics: DOL Fiduciary Rule
• DOL Final Fiduciary Rule Released, Set to Become Effective in September
• DOL Fiduciary Rule Update with Fred Reish