Ready or not, here comes the conflict-of-interest rule!

Ready or not, here comes the conflict-of-interest rule!


By Jane Smith

The fiduciary rule, a new Department of Labor regulation that took partial effect on June 9, 2017, requires investment advisers to provide advice that is in the best interests of their clients. The implementation of this common-sense regulation, also known as the conflict-of-interest rule, is a big win for investors. The rule requires advisers to follow a fiduciary standard when giving investment advice and applies to advisers who give advice to investors with 401(k) plans and IRAs. The rule also defines the types of financial advisers that the Department of Labor considers to be fiduciaries.

Before the fiduciary rule, the many types of professional advisers who provided investment advice were each guided by different sets of rules that often did not prohibit conflicted advice. The fiduciary rule eliminates those distinctions and clarifies that all investment advisers must provide advice that is in the best interests of their clients. The cost to consumers when investment advisers fail to provide advice that is not in the best interest of their clients is high. The Council of Economic Advisers estimates that conflicted investment advice costs American consumers as much as $17 billion every year.

While some parts of the fiduciary rule are now effective, a presidential memorandum requesting further study about the rule’s impact has delayed implementation of other parts until at least January 1, 2018. As a result of the President’s request, the Department of Labor issued a Request for Information Regarding the Fiduciary Rule and Prohibited Transaction Exemptions seeking comment on some technical questions as well as whether the projected date for full implementation should be extended beyond January 1, 2018. The RFI questions include whether advice to make or increase contributions to a plan or IRA should be excluded from the fiduciary definition.

Comments regarding extending the January 1, 2018 effective date were due by July 21, 2017.  Comments for all other issues in the RFI are due August 7, 2017.

The fiduciary rule saga isn’t over yet, but don’t worry, we’ll keep you posted on what happens next.

Not sure where to start but have questions?

Contact us >

Sign up to receive updates from us:

Do you want to stay up to date on the latest retirement news and recent happenings at PRC?

Sign up to receive emails from us:

Click here >

Support the Pension Rights Center:

In today’s challenging pension environment, our work is more important than ever. Your contribution will help make it possible for the Center to continue its crucial role as a national consumer organization committed to protecting and promoting retirement security.

Donate >