Paul L. Vorndran
The U.S. Department of Labor (DOL) has expanded the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974. On April 6, 2016, the DOL issued its final rule (Fiduciary Rule) imposing fiduciary duties upon those who provide investment advice for compensation—direct or indirect—as to the purchase or sale of securities or other investments within a plan or individual retirement account qualified under the Employee Retirement Income Security Act of 1974. According to the Executive Summary, the Fiduciary Rule “aims to require advisers and their firms to give advice that is in the best interest of their customers, without prohibiting common compensation arrangements under conditions designed to ensure the adviser is acting in accordance with fiduciary norms and basic standards of fair dealing.” Further, according to the Executive Summary, the DOL concluded (after a multi-year study that began in 2009) that IRA holders receiving conflicted investment advice may see their investments underperform by an average of 0.5 to 1% per year. This could result in a cost to IRA investors between $95 billion and $189 billion over the next 10 years in the mutual fund segment alone.