Anatomy of a Risk Assessment Preparing for the DOL Fiduciary Rule - - PowerPoint PPT Presentation

Anatomy of a Risk Assessment

Preparing for the DOL Fiduciary Rule Change

Evan Rosser Director Ami Shah Director Robert Tuch Senior Consultant Gena Spitzer Relationship Manager,

Statements made by the DOL in the preamble:

In the preamble to its Fiduciary Rule, the DOL indicated that advisers to plans and IRAs may be providing conflicted advice that furthers their

• wn interests rather than the interests of retirement plan participants

and IRA owners. The DOL also indicated that a broader definition of “fiduciary” would be appropriate to better protect the interests of plans, plan participants, plan beneficiaries and IRA owners from possible conflicts of interest, imprudence or disloyalty.

Fiduciary - any individual receiving

compensation for providing individualized advice or advice specifically directed to a particular plan sponsor (e.g., an employer with a retirement plan), plan participant,

• r IRA owner for consideration in

making a retirement investment

The new definition includes:

 A recommendation to take a distribution  A recommendation regarding the investment of assets to be rolled over to an IRA  A recommendation regarding individuals who will render investment advice

The new definition does not require that advice be made on a regular basis.

Investment Education Platform Providers General Communications

Advice providers need to provide advice based on the retirement investor’s:  Investment objectives  Risk tolerance  Financial circumstances  Needs of the retirement investor An advice provider needs to provide advice without his/her regard to their own financial or other interests and without regard to those of the financial institution or any affiliated entity.

Includes transactions resulting in the receipt of variable compensation such as:  Sales loads  Rule 12b-1 fees  Trailing commissions  Revenue sharing payments

 Acknowledge that the advice provider and his/her firm are fiduciaries  Commit the firm and adviser to providing advice in the client's best interest

(Impartial Conduct Standards)

 Adopt policies and procedures designed to mitigate conflicts of interest  Clearly and prominently disclose any conflicts of interest that might prevent the

adviser from providing advice in the client's best interest.

 Prior to or at the same time as the execution of the recommended

transaction, the adviser’s firm shall provide the retirement investor with a written statement of the firm’s and the adviser’s fiduciary status.

 The firm and the adviser must adhere to the Impartial Conduct

Standards.

 When recommending rolling assets from an ERISA plan to an IRA, the firm

shall document the specific reasons why the recommendation is in the best interest of the retirement investor. The documentation must:

• 1. Include consideration of the retirement investor’s alternatives to the

rollover.

• 2. Take into account the fees and expenses associated with both the

ERISA plan and the IRA, whether the employer pays for some or all of the plan’s administrative expenses and the different levels of services and investments available under each option.

 When recommending that assets be moved from another IRA or that

the investor switch from a commission-based account to an account that charges a level fee, a Level Fee Fiduciary must document the reasons why the arrangement is in the best interest of the retirement investor, including the services that will be provided for the fee.

 If applicable, the BIC Exemption conditions relating to proprietary

products must be satisfied.

June 7, 2016

• DOL Rule

becomes effective April 10, 2017

• DOL Rule will

become applicable Jan 1, 2018

• All

requirements for BIC Exemption to be met

October 26

• Now What – Next Steps in Preparing for the DOL

Fiduciary Rule Changes

January 2017

• Are you ready for April – Training and Education

Around the DOL Fiduciary Rule Changes

April 2017

• Testing Your Implementation Model – Does it Stand

Up to the DOL Fiduciary Rule Changes

May 2017

• Preparing for Next Year’s Requirements of the DOL

Fiduciary Rule Changes – How to Utilize the BIC

For more information:

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(804) 965-5400

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