DOL Fiduciary Rule

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On June 9, 2017 the Department of Labor’s (DOL) fiduciary rule will go into effect.

Franklin Templeton Investments is dedicated to the investment needs of the U.S. retirement community, from retirement savings through generating income in retirement, and we believe it is important to stay in the know with regard to the impact of these changes. Below are resources to help you. Bookmark this page.

RESOURCES

A Step-By-Step Guide: Rollovers Under the Fiduciary Rule Kit (Order Only)

This kit was designed to help you when recommending a rollover.

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Rollovers Under the Fiduciary Rule

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Final DOL Fiduciary Regulation: Implications for Rollovers

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Questions and Answers

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  • The DOL put into place a new Best Interest Contract (BIC) exemption, which permits advisors and financial institutions that are fiduciaries to receive various forms and levels of compensation, including variable compensation. As a condition of receiving compensation that would otherwise be prohibited under the prohibited transaction rules governing ERISA plans and IRAs, the exemption requires financial institutions to acknowledge their fiduciary status and the fiduciary status of their financial advisors in writing. The financial institution and advisors must adhere to enforceable standards of fiduciary conduct and fair dealing with respect to their advice, must have policies and procedures to limit the effect of conflicts, and must provide transparency regarding financial incentives. In the case of IRAs for example, the exemption requires that the standards be set forth in an enforceable contract with the Retirement Investor.

  • The BIC is really a series of rules designed to impose different conditions on advice in varying circumstances. Thus, different rules will apply to: (1) IRA and rollover advice, (2) advice to ERISA plans and participants, (3) “Level Fee” advice, (4) advice during a short transition period from April 10, 2017 to December 31, 2017, and (5) advice on products sold before the effective date. The core of the BIC is to ensure that advice is in the client's “best interest,” that advisors not have compensation incentives intended to cause recommendations not in the client's best interest, and clients receive disclosures to enhance transparency. In addition, there will be many circumstances where the BIC is not required, either because there is no fiduciary recommendation occurring or another compliance strategy is in place.

  • Since this rule affects ERISA plan and IRA assets themselves, most financial advisors are impacted. This, in turn, impacts their clients. Some of the issues advisors, the firms they work for and asset managers are looking into:

    Practice models — fee based, commission, or a hybrid of the two?

    Product types — which ones fit the guidelines established by the new rule?

    Client interactions — how do those need to change based on the new fiduciary definition and expanded scope of the rule?

These and other questions will undoubtedly impact how investors get financial advice. As a firm, we are exploring all of these questions and more, and working with others in the industry to find the right answers and continue doing what is right for our clients.