This Friday June 9, the DOL Fiduciary Rule—the landmark Obama-era investor protection rule–will go into theoretical effect, with full implementation on Jan. 1, 2018.  But during this transition period running throughout the remainder of 2017, the rule has no meaning.  In May, the DOL said it would not enforce any parts of the rule until 2018 when the rule in its entirety, including required disclosures, declaration of fiduciary status, and contracts that give rise to private lawsuits, is set to go into effect.

Concerning this DOL fiduciary standard, the financial services industry is still arguing whether or not to accept fiduciary status.  ERISA mandated this way back in 1974—43 years ago!   This issue has confused the industry.  Most believe the key issue is about accepting fiduciary status.  This is completely wrong!  The real question is about fiduciary governance and delivering 100% accurate fiduciary compliance and results.

“Accepting the title of fiduciary status under the DOL Rule does not make you a true fiduciary.  A true fiduciary delivers reliable fiduciary governance over a wide range of areas.”

Remember that this governance is at the participant level—not much at the plan level.  While there is a general fiduciary duty to the plan, the real fiduciary duty is to protect the participants.

If there is confusion regarding this duty to the participant— review ERISA section 404(a)(1) “a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and—(A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries.

The financial services industry is undergoing a significant transformation in the way that advisory services are provided and delivered to individual investors.  This evolution is being driven by a variety of factors from new regulations, to changing demographics, to technological advances.  These changes are occurring at a time when the need for financial advice has never been greater, as savers grapple with global and geopolitical uncertainty, prolonged low and negative interest rates, and longer lifespans.  Despite these significant headwinds, many innovators in the financial advice industry are working to ensure that individuals have access to financial advice that can meet their needs. New solutions are beginning to emerge in many forms.

Yet the industry has not been able to find an efficient total compliance solution embedded in the actual delivery of the fiduciary services—and certainly not at the participant level.  The DOL rule will only exacerbate this problem.  (Some robo advice system say they are in compliance with the DOL Rule—meaning they offer fee leveling.  This is only one of the 85 best investment advisory practices from Fi360)

We hear about “robo” or digital advice every day now.  We also hear much about the DOL fiduciary standard.  Yet no robo adviser can be sure all fiduciary best practices and compliance are in place for their clients.  In fact, most are not even thinking about it!  However, Unified Trust will deliver the highest standards of compliance for our clients.

Why do we need to have both digital advice and digital fiduciary compliance?  Only better technology and data management can accomplish this.  There is a perfectly valid reason for people to value technological/automated solutions, even for items of such importance as financial assets.  Technology is perceived as pure, transparent, rational, accurate, and unbiased.  Trust in technology, for the growing cohorts accustomed to it, is intuitive.  Humans are fallible and might manipulate the system to make themselves look better.  The media and pop culture foster a huge distrust of traditional financial services.  Unified Trust will be able to show, better than anyone else, why trust in our technology, process, and people is unwavering and are core features of working with us.

Unified Trust has always excelled at putting the interests of clients first.  Yet we are investing significant resources to make it easier, more fulfilling and efficient for our employees to continue that work and drive deeper innovation and even better outcomes.

 

About Greg Kasten view all posts

Dr. Gregory W. Kasten serves as Founder and CEO of Unified Trust Company. He has published more than 100 papers on financial planning and investment-related topics in various financial and business journals; written two editions of the book Retirement Success. In 2007-2009, Medical Economics listed Dr. Kasten as one of "The 150 Best Financial Advisers for Doctors" in the country. Dr. Kasten was inducted into the Advisor Hall of Fame by Research Magazine in 2011 and in 2013 was named Retirement Plan Adviser of the Year by Employee Benefit Adviser Magazine. He has more than thirty years of investment experience.