“The big picture is huge. It is very much a radical reshaping of our landscape at this point.” With that, David N. Levine, Principal, Law Group, Chartered, opened the recent ASPPA webcast, “The Conflict of Interest Proposal: How it Works and What it Means.” Pete Swisher, Senior Vice President and National Sales Director of Pentegra Retirement Services, joined Levine in a discussion of what the Department of Labor’s (DOL) recent fiduciary redefinition proposal means and portends.
“It is changing what has been around for decades and changing the roles that everybody plays, whether they are fiduciaries or not, and making them have to say, ‘Am I a fiduciary? Am I not? And what does that mean on all my relationships out there?’’’ said Levine. Swisher agreed, calling the thrust of the rule “a frontal assault on advisors who receive variable compensation or commissions.”
Still, Swisher says that regarding the big picture, he feels “a bit torn” and “always thought it made sense for the DOL to review a law enacted in 1974.” Still, he said, “On the other hand, there are a lot of problems” with the DOL proposal."
Levine and Swisher devoted considerable attention to the two new prohibited transaction exemptions (PTEs) — the best interest contract and principal transactions exemptions — and the revisions to the six existing PTEs. “The key point about this is that these exemptions are all being reworked as one big package to sort of set a standard requirement for compliance and then exemptions that say, ‘even if you might be caught in a compliance trap, here’s how you get out.”
“Do these pieces actually work together or not?” asked Levine, who then answered his own question, “in a lot of cases, they don’t.”
Among the broad implications Levine and Swisher identified as stemming from the proposal:
The recorded webcast is now available on demand. For more information, click here.
“It is changing what has been around for decades and changing the roles that everybody plays, whether they are fiduciaries or not, and making them have to say, ‘Am I a fiduciary? Am I not? And what does that mean on all my relationships out there?’’’ said Levine. Swisher agreed, calling the thrust of the rule “a frontal assault on advisors who receive variable compensation or commissions.”
Still, Swisher says that regarding the big picture, he feels “a bit torn” and “always thought it made sense for the DOL to review a law enacted in 1974.” Still, he said, “On the other hand, there are a lot of problems” with the DOL proposal."
Levine and Swisher devoted considerable attention to the two new prohibited transaction exemptions (PTEs) — the best interest contract and principal transactions exemptions — and the revisions to the six existing PTEs. “The key point about this is that these exemptions are all being reworked as one big package to sort of set a standard requirement for compliance and then exemptions that say, ‘even if you might be caught in a compliance trap, here’s how you get out.”
“Do these pieces actually work together or not?” asked Levine, who then answered his own question, “in a lot of cases, they don’t.”
Among the broad implications Levine and Swisher identified as stemming from the proposal:
- it’s a game changer for IRAs in general and rollovers in particular;
- it’s a massive restructuring effort;
- it will have a direct effect on brokers, insurance agents and the investment manufacturers that serve them; and
- even fee-only registered investment agents and non-producing third party administrators may be affected.
The recorded webcast is now available on demand. For more information, click here.
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