Department of Labor Proposes New Advice Standard (Again)
The Department of Labor has proposed a new fiduciary advice rule to replace the rule vacated by the 5th Circuit in 2018. The proposal goes back to the previous 5-part test to determine whether an adviser or broker-dealer is an “investment advice fiduciary”: advice as to the value of securities, regular basis, pursuant to an agreement, basis of investment decisions, and individualized. Advice related to an IRA rollover may not fall under the new rule if the advice is isolated and not part of an ongoing relationship. In order to take compensation, an investment advice fiduciary must satisfy the SEC’s best interest standard, ensure sufficient disclosure, and implement compliance policies and testing.
We hope this is the last iteration of a fiduciary advice standard, but we doubt it. We expect many comments, debates, and more lawsuits. We also expect that a change in political administration could upend both the DoL rule and the SEC fiduciary rule. Like soft dollars and 12b-1 fees, this debate may never end.