BISA Magazine - Quarter 3, 2016 - 27

industry will deal with retirement plans and IRA accounts. DOL Fiduciary Rule Applicability The new DOL fiduciary rule applies to financial firms and advisors who deal with ERISA plans and IRA accounts. Although the rule has a broad range of implications for areas of the industry that touch these types of accounts, the DOL maintains that the primary goal of the rule is to protect the individual participants in a retirement plan, as well as IRA account holders. Under the DOL fiduciary rule, it is important to understand that an advisor can be an individual or entity. That means they can be, among other things, a representative of a registered investment advisor, a bank or similar financial institution, an insurance company or a broker-dealer. The rule is not intended to refer only to registered investment advisors under the Investment Advisors Act of 1940 or under state law. How the New Rule Defines a Fiduciary Since 1975, ERISA has used a five-part test to define fiduciaries. However, this test has been replaced by the DOL fiduciary rule's new definition of fiduciary: A person is a fiduciary to a plan or IRA to the extent that the person conducts specified plan activities, which include giving "investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan." Based on this definition, a person who gives investment advice to a plan or IRA for a fee is now a fiduciary. This The DOL fiduciary rule uses a lot of language to detail what is considered investment advice. But when you get down to the basics, investment advice is any recommendation that causes the account holder to take action in regards to the plan or IRA account. may sound simple, but as with any regulation, there is more to it. How the New Rule Defines Investment Advice The DOL fiduciary rule uses a lot of language to detail what is considered investment advice. But when you get down to the basics, investment advice is any recommendation that causes the account holder to take action in regards to the plan or IRA account. The types of recommendations covered by the rule include: the management of the account, investments, type of account (brokerage or RIA), portfolio composition and selection of an investment manager. Even recommending a rollover from a retirement plan to an IRA is considered fiduciary investment advice. After defining investment advice, the rule identifies seven exceptions/exclusions that are situations in which the advisor is not considered to be giving investment advice, and is therefore not a fiduciary. The exceptions/exclusions that affect advisors dealing with IRA accounts are: "Hire Me," Investment Education and General Marketing Communications. The other four exclusions pertain specifically to ERISA plans. * "Hire Me" "Hire Me" refers to how an advisor may speak with a potential client about their firm and the services it offers. This information is general in nature and not specific to the person to whom the advisor is speaking. Once an advisor begins discussing, as recommendations, some of the items listed above, they have become a fiduciary who gives investment advice. * Investment Education Investment Education is self-explanatory: An advisor can talk about general information to educate the client or potential client on investing, retirement or other general concepts. But, again, once they start getting specific about the individual's particular situation, they may be moving into fiduciary status. 27 BISA Magazine

Table of Contents for the Digital Edition of BISA Magazine - Quarter 3, 2016

Table of Contents
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BISA Magazine - Quarter 3, 2016 - Table of Contents
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BISA Magazine - Quarter 3, 2016 - Cover3
BISA Magazine - Quarter 3, 2016 - Cover4
https://www.nxtbook.com/nxtbooks/bisa/2017q4
https://www.nxtbook.com/nxtbooks/bisa/2017q3
https://www.nxtbook.com/nxtbooks/bisa/2017q2
https://www.nxtbook.com/nxtbooks/bisa/2017q1
https://www.nxtbook.com/nxtbooks/bisa/2016q4
https://www.nxtbook.com/nxtbooks/bisa/2016q3
https://www.nxtbook.com/nxtbooks/bisa/2016q2
https://www.nxtbook.com/nxtbooks/bisa/2016q1
https://www.nxtbook.com/nxtbooks/bisa/2015q4
https://www.nxtbook.com/nxtbooks/bisa/2015q3
https://www.nxtbook.com/nxtbooks/bisa/2015q2
https://www.nxtbook.com/nxtbooks/bisa/2015q1
https://www.nxtbook.com/nxtbooks/bisa/2014q4
https://www.nxtbook.com/nxtbooks/bisa/2014q3
https://www.nxtbook.com/nxtbooks/bisa/2014q2
https://www.nxtbook.com/nxtbooks/bisa/2014q1
https://www.nxtbookmedia.com