DOL Fiduciary Rule

The Department of Labor’s (DOL) new Fiduciary Conduct Rule
broadens the definition of a fiduciary and begins to apply in 2017.
This page is intended to:

  • Educate advisors on intent behind the proposed DOL fiduciary rule
  • Give an in-depth look at its provisions
  • Help advisors analyze how the rule might affect their business

RESOURCES

Whitepaper

DOL Fiduciary Rule: Impact and Next Steps

The Department of Labor (DOL) recently proposed changes to the ERISA fiduciary rule. This paper summarizes the background of the rule, key provisions and next steps.

Whitepaper

DOL Fiduciary Rule: 2017 Update

Features updates on the current state of the DOL Fiduciary Rule and impact of a Trump presidency.

Frequently Asked Questions

+ Does this rule even apply to me? I don’t manage any retirement business.

If you provide advice toward the purchase of securities within an IRA or qualified retirement plan, this rule probably applies to you.
+ Is a fiduciary standard for all types of accounts inevitable?

Not necessarily, but there is a regulatory trend toward working to take conflicts out of investment advice. The SEC has made statements that they are working on their own rule for more broadly imposing an investment advisor fiduciary standard.
+ Does this mean I can’t receive any commissions on plan or IRA rollover business?

The Best Interest Contract Exemption (BICE) allows advisors to receive commissions as long as they abide by the requirements set out in the rule, including rigorous procedural and contractual requirements.
+ What is the BICE?

The BICE is an exemption that allows fiduciaries to receive a broader array of compensation types as long as they meet an impartial, best interest, conduct standard and procedural, contractual and substantive requirements.
+ What is the best interest standard?

This standard requires prudent advice that is based on the investment objectives, risk tolerance, financial circumstances and overall needs of the investor without regard to interests of the advisor or financial firm.
+ What are the options for affected accounts?

There are three main options: 1) transition account to fee-only; 2) use an exemption, such as the BICE; or 3) transition clients to self-directed methods. However, firm responses are not limited to these options, and if the advisor continues to serve the client, any changes must meet a best interest standard.
+ What if I’m a fee-only advisor? Does that automatically mean I don’t have to worry about the rule?

An RIA standard is not the same as an ERISA fiduciary standard, and advisors must comply with both. There is a “level-fee” provision in the rule which allows level-fee fiduciaries who would otherwise need to use BICE to satisfy it without a contract, as long as they meet the best interest standard.
+ How will asset manager revenue-sharing agreements and 12b-1 fees be affected by the DOL rule?

It is likely that these payments will be considered prohibited transactions requiring an exemption, like BICE.
+ What will happen to different share classes?

No one is sure yet. Firms may look for ways to expand no load and institutional share classes or develop additional no load, no 12b-1 fee share classes.
+ Will this rule cause more assets to move into index ETFs and other low fee products?

Perhaps, but the trend toward low cost products predates the rule. The rule is intended to limit conflicts of interest in the provision of advice and impose more transparency on fund fees and advisor compensation.

NEXT STEPS

  • Financial Advisors:
    Call 800-752-8700

Investors: Contact your financial advisor

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