RiXtrema, a leading provider of risk management tools and analysis to the financial advisory and broker/dealer community to help ensure that investors get the analysis and advice they need, announced the launch of its DOL Fiduciary Rule Checklisk. The Checklist is complimentary and available for use by anyone. To go through the DOL Fiduciary Rule Checklist, visit www.DOLrulechecklist.com.
Once the advisor has completed the checklist and is clear as to the remaining obligations, he or she has the option of using RiXtrema’s IRAFiduciaryOptimizer to create best interest documentation that addresses the DOL Rule requirements. The comparison highlights a variety of measures such as fees, track record of the investments, risk vs. risk tolerance, and best fiduciary practices. The tool then produces a report summarizing why a rollover is in the best interest of the client. For information about the IRAFiduciaryOptimizer, visit https://rixtrema.net/irafiduciaryoptimizer/index.
ERISA FIDUCIARY DUTIES
“Every advisor who advises on retirement account assets as of June 9, 2017, is effectively an ERISA fiduciary who must adhere to Impartial Conduct Standard and charge no more than a reasonable fee,” explained RiXtrema President Daniel Satchkov. “It’s essential that advisors understand this and take necessary action to comply with the rule.”
In addition to the requirements that ERISA fiduciary status implies, the DOL Rule also contains requirements for very specific documentation regarding investor’s best interest. The Best Interest Document must follow DOL requirements and contain specific data points regarding both the retirement plan and the IRA account. These data points will show whether a rollover or IRA-to-IRA transfer is in the best interest of the investor. The Checklist contains seven sections dealing with various requirements of DOL Fiduciary Rule best interest documentation. Each section contains detailed specific questions with references to legislation or DOL FAQ. By going through the Checklist advisors will know exactly where they might fall short and how to fix the problem.
The DOL Fiduciary Rule stipulates that any rollover (whether level fee or not) is considered to be a “prohibited transaction,” thus any advisor who onboards IRA assets, since the promulgation of the rule on June 9, 2017, is required to document why the rollover is in the best interest of the investor. Specifically, the DOL has said: Although the documentation requirement is only specifically recited in the level fee provisions of the BIC Exemption, the documented factors and considerations are integral to a prudent analysis of whether a rollover is appropriate. Accordingly, any fiduciary seeking to meet the best interest standard as set out in the exemption would engage in a prudent analysis of these factors and considerations before recommending that an investor rolls over plan assets to an IRA or other investment, regardless of whether the fiduciary was a ‘level fee’ fiduciary or a fiduciary complying with the full BIC Exemption.
“We can’t state forcefully enough that advisors must be fully engaged in complying with the rule,” added Satchkov. “While there continues to be talk of delays in some areas of the rule, none concern the area addressed in the above DOL comment. Advisors who are not addressing this issue may incur liability due to ‘private right of action,’ which means that private parties can bring lawsuits as implied by the effective ERISA fiduciary status. Various delays by the DOL are distracting advisors, but it is important to understand that delays do not touch the core of the rule, which is fully in effect as of June 9, 2017. We are seeing that many advisors are starting to understand the landscape and the serious nature of their obligations. As a result, we are experiencing strong adoption of our IRAFiduciaryOptimizer by advisors wanting to ensure compliance.”
Founded in 2010, RiXtrema makes sophisticated quant algorithms work for investment fiduciaries. RiXtrema built a FiduciaryOptimizer suite of products including 401kFiduciaryOptimizer to help plan advisors grow their business, IRAFiduciaryOptimizer for best interest rollover reporting, AnnuityOptimizer for annuity analysis and Target-Date FiduciaryOptimizer scheduled for release in September 2017. The RiXtrema research team received the 2015 Peter L. Bernstein award, one of the most prestigious awards in finance, for its article Risk Estimation and Hedging: A Reverse Stress Testing Approach, published in The Journal of Derivatives in April 2015. For more information, visit www.rixtrema.com.