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Fiduciary Update - The DOL Fiduciary Rule is Here

The DOL’s Fiduciary Rule is here!

 
A portion of the Department of Labor’s revised fiduciary rule has now gone into effect and everyone earning commissions on the sale of IRA fixed annuities is impacted. 
 
New DOL fiduciary rule. The DOL expanded who qualifies as a fiduciary by broadening the definition of investment advice to include any person who makes a recommendation for a fee or other compensation concerning the advisability of acquiring, holding, or disposing of investment property in an IRA. So, if an agent receives a commission or fee on the sale of an IRA fixed annuity, they are now a fiduciary.
 
Once fiduciary status is triggered, certain compensation arrangements are prohibited, most notably commissions. However, there are Prohibited Transaction Exemptions (PTE) that still allow for receipt of commissions provided the terms of the PTE are followed.
 
PTE 84-24. This is the exemption that applies to traditional fixed annuity sales, both deferred and immediate. (It can also be used for fixed index annuity sales during a transition period that ends December 31, 2017.) We’re only going to discuss the requirements that apply starting June 9th through the end of the year. There may be additional requirements beginning in 2018.
 
The basic goal of PTE 84-24 is to impose an impartial conduct standard. There are three components to this standard:
1.      Act in the best interests of the client (duty of loyalty and prudence);
2.      Avoid misleading statements;
3.      Receive no more than reasonable compensation.
 
New Forms to Help Comply with PTE 84-24. 
1.       84-24 Disclosure Form. We have sample forms on our website that you can use to disclose:
1.      Your relationship as an independent agent with the company;
2.      Your sales commission
3.      A description of fees, charges, etc.
4.      Any conflicts of interest you may have in addition to the receipt of commission.
2.       Best Interest Questionnaire. This can be used to document your client’s needs, choice of products to meet those needs and the basis of your product recommendation. We also have some sample questionnaires on our website for your use.
3.      New Suitability Forms. Every company has updated their suitability forms to include a certification that you have complied with these new rules. You should make sure you are using new suitability forms for any sale starting June 9th and later.
 
One important point to remember is that compliance with the exemption is the responsibility of the agent and not the company.  

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