They may not realize it, with all the news of delays and partial implementations of the fiduciary rule — but advisors providing advice on retirement accounts are ERISA fiduciaries and need to act as such.
That's according to RiXtrema, which has launched a tool, as have many in the financial industry, to help with fiduciary rule compliance. Its DOL Fiduciary Rule Checklist aims to help advisors make sure they've dotted all the i's and crossed all the t's.
"Every advisor who advises on retirement account assets as of June 9, 2017, is effectively an ERISA fiduciary who must adhere to Impartial Conduct Standard and charge no more than a reasonable fee," Daniel Satchkov, president of RiXtrema, says in a statement, adding, "It's essential that advisors understand this and take necessary action to comply with the rule."
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In addition to making sure they're compliant with fees and impartial conduct, the rule also requires advisors to maintain "very specific documentation" regarding the investor's best interest.
Specific data points must be included regarding both the retirement plan and the IRA account to forestall running afoul of the rule, which stipulates that any rollover (whether level fee or not) is considered to be a "prohibited transaction,"
As a result, any advisor who onboards IRA assets since the promulgation of the rule on June 9, 2017, is required to document why the rollover is in the best interest of the investor.
The Best Interest Document must follow DOL requirements and contain specific data points regarding both retirement plans and IRA accounts that will indicate whether a rollover or IRA-to-IRA transfer is in the best interest of the investor.
Advisors can find seven sections in the checklist that deal with various requirements of best interest documentation, with each section containing detailed specific questions with references to legislation or DOL FAQ. Questions cover aspects of the rule including fees and expenses; the level of services and investments available; risk, objectives and needs suitability; and fee reasonableness.
Once checklists are completed, advisors can use RiXtrema's IRAFiduciaryOptimizer to create best interest documentation addressing rule requirements. It will compare data on a variety of measures such as fees, track record of the investments, risk vs. risk tolerance, and best fiduciary practices. The tool then produces a report summarizing why a rollover is in the best interest of the client.
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