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DOL Fiduciary Rule

The DOL Fiduciary Rule: Compliance and Managed Account Technology

With the Department of Labor (DOL) Fiduciary Rule now official, the mood in the industry has progressed from anticipation to “analysis paralysis.” With this new fiduciary standard comes a litany of challenges such as: examining fees and compensation structures associated with retirement accounts, reviewing each financial instrument offered, identifying accounts and transactions that will require fiduciary oversight, determining the appropriate solution for compliance, determining whether and how to employ and comply with the Best Interest Contract Exemption (BICE),  particularly with respect to 401(k) rollover opportunities, and, finally, determining the overall impact to business growth, revenue and expense projections.  

Many firms are still determining how to best manage these challenges, particularly those associated with the BICE, required disclosures, and how to manage the related existing, non-fiduciary accounts. Firms must analyze all accounts to determine which fall under the fiduciary definition and if so, which fiduciary-compliant structure is best. Key considerations in the analysis process should include:

  • Defining interpretation and population of impacted accounts
  • Identifying largest concerns with compliance
  • Defining process for new accounts and train the field
  • Establishing solution options and aligning impacted accounts
  • Training field and support staff on action plan for existing accounts
  • Creating action plan and implement

The process of analyzing the impact and defining an action plan will vary. BICE is likely to be a substantial part of the conversation. With BICE, the conversation has progressed from “Does our business require the BICE?” to “How do we best use the BICE?” and more specifically, “Which type of BICE is appropriate for our business?” For a level-fee fiduciary, one that charges a level fee based on assets under management and does not receive any variable fees, “BICE Light,” a provision added to the final rule, less is required for simple account rollovers. The other BICE provision, often referred to as “BICE Heavy,” requires heavier disclosures. Either way, the BICE will inevitably mean significant changes for a firm’s technology and operations.

Many look to leverage managed account programs and technology platforms to help mitigate these challenges and bridge the gaps. With the ability to centralize data into actionable information and leverage existing resources, infrastructure and compliance tools traditionally used for fiduciaries, managed account programs (traditional and digital), are a key component of most solutions.  

Interestingly, managed account platforms may also provide a solution for non-managed retirement accounts that fall under the fiduciary standard. Supporting all fiduciary retirement accounts on a single platform may provide firms and their advisors with:

  • A place to aggregate the necessary data, and use that data for monitoring, reporting and disclosure of required information to compliance officers, investors and regulators
  • Separation of self-directed and/or low-balance accounts, and determining distinct compliance oversight and monitoring
  • Consolidated monitoring of reasonable fees and best-interest trading activity

Efficiency, scale and tracking of key information are critical to supporting retirement business under the new DOL fiduciary standards. Ultimately, these standards will help advisors to best serve their clients to achieve the investment goals that best fit their lives.

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Rich Touhill is the director, Product Management Strategy, Investment Services, Fiserv.

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