It may seem like the effective date of the DOL Fiduciary Rule is far off – April 2017; however there is much preparation to begin now. My clients will be receiving a survey from me this week that will help us begin to prepare. Those of you working through this on your own should consider the following:
- What type of investments do your current retirement investors have? List out all and then add annuities, Coverdell Education Savings and Health Savings accounts, Solo 401(k)s, SEPs and Simple IRAs. This is in addition to the typical retirement accounts that you may consider, e.g., IRAs, 403(b), 401(k)s, etc.
2. Then consider what type of recommendations you make to these investors. For example do you recommend rollovers to a different type of account (whether you will mange them or not).
3. Do you recommend brokerage versus advisory accounts? Recommending one investment over another?
4. Do you charge commissions or receive trailing commissions like 12b-1? What type of advisory fee are you charging. Do you charge the same fee for all types of investments or do you charge less for bonds than you do for equities?
5. Do you receive soft dollars paid from custodians?
6. Do you do any agency cross transactions that include a client’s retirement account?
7. Do you receive a Solicitor Fee or Revenue Sharing?
All of these are things that you should be aware of now and will help you to determine what changes you will need to make to your firm before the April 2017 effective date.
You may need to make changes to your ADV Part 2 during the annual updating amendment. By preparing now, it will be easier to complete.
Your responses will also help you to determine if you will be required to complete a full BIC exemption or will qualify for the Level Fee Fiduciary exemption. If you are required to complete the full BIC exemption, you will want to begin that work soon.