DOL Rule Sets Up Compensation Minefield
August 2, 2016 by John Hilton
The Department of Labor fiduciary rule was published nearly four months ago, but analysts say broker-dealers and their advisors still don’t fully understand how compensation is affected.
The rule requires anyone working with retirement funds to act in the best interest of their clients. That means “conflicted” compensation, like trail commissions and trips to Cancun, are out.
However, the DOL included a series of exemptions permitting advisors to continue accepting such compensation if they meet certain disclosures and the recommended investment product is still in the best interest of the client. Specifically, the Best Interest Contract exemption theoretically allows advisors to continue selling variable and fixed-indexed annuities on a commission basis.
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