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A New Proposed Fiduciary Rule Stirs Controversy

The new fiduciary rule proposed by the Department of Labor (DOL) has been a lightning rod for controversy in the financial services community. The rule redefines who is a "fiduciary" under the Employee Retirement Income Security Act. While the rule is scheduled to be finalized by the DOL in 2016, Congress is debating legislation affecting the rule and it also could face challenges in court.

Under the proposed rule, anyone compensated for providing advice to a retirement plan sponsor (for example an employer with a retirement plan), plan participant, or IRA owner about retirement investment decisions would be treated as a fiduciary.

That could include brokers, registered investment advisors, insurance agents, and others. As fiduciaries, they would be prohibited from engaging in transactions creating a conflict of interest with their clients. And both the advisor and the client would have to sign a contract acknowledging the new rules.

In addition, the rule change would require advisors to post detailed information about fees and other transactional costs from product sales on a public website in a readable format. It also would mandate point-of-sale disclosures, including cost projections over one, five, and 10 years for each product sold, and annual reports on all products.

Expect to hear more about this soon. We will keep you posted.


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This article was written by a professional financial journalist for Clark Planning & Investment Advisory and is not intended as legal or investment advice.

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