DOL Regs. Make Advisors Fiduciaries

Did you read last week’s article titled: NY Times Hammer Athene but A.M. Best Gives Upgrade? If not, click on the following link:

DOL Regs. Make Insurance Agents and Series 7 Licensed Advisors Fiduciaries

                Recently the DOL (Department of Labor) put out a set of new proposed regulations that cover advice given to clients who have money in qualified plans and IRAs. To read a summary of the new regs. (which include some stunning fee/commission disclosure language), click on the following link:

Best interest of the client—I find the fact that many advisors are all up in arms about these new regs somewhat comical. Who would argue that “ALL” advisors should “ALWAYS” be giving advice that’s in their client’s best interest? Apparently B/Ds and Series 7 licensed advisors would make such an argument and that argument will now fail.

ALL advisors are now “fiduciaries” (including insurance agents and Series 7 licensed advisors)

Under DOL’s proposed definition, ANY individual receiving compensation for providing advice that is individualized or specifically directed to a particular plan sponsor (e.g., an employer with a retirement plan), plan participant, or IRA owner for consideration in making a retirement investment decision is a fiduciary.

The fiduciary can be a broker, registered investment advisor, insurance agent, or other type of advisor.

A game changer?—for three years now the writing has been on the wall when it comes to insurance agents having to obtain some kind of a securities license in order to avoid regulatory issues with the “source of funds” rule.

There are many in the industry who have advised insurance agents NOT to get a series 65 license because doing so would make them a “fiduciary” and would increase their liability. I’ve strongly stated that I think this opinion is dangerous, but now with the DOL regs. pertaining to assets in IRAs, my position that EVERY insurance agent should get a Series 65 license has been greatly strengthened.

Since the DOL’s new regs. state that ANY advisor giving advice to clients about money in their IRA is a “fiduciary,” insurance agents might as well become fiduciaries by obtaining their 65 licenses.

Best interest of the client

The new DOL regs. are trying to force advisors to truly give advice that’s in their client’s best interest. It’s a novel idea in an industry that rarely puts the client’s interest ahead of the B/D, IMO, or advisor’s interests. I can’t wait for the lawsuits against advisors who violate this rule. They hopefully will run many out of the business.

The “best” way to comply with these new regs. is to get a 65 license and incorporate the use of the platform.

Think about it; if there was an AUM platform with the following statistics, arguably, wouldn’t such a platform have to be offered to clients in order to comply with the best interests of the client rule?

-The top three “conservative” strategies have an average Beta of .24* (the S&P has a Beta of 1.00). The average annual return for their top three “low-risk” managers going back seven years is 9.19%* net of fees (truly incredibly for “low-risk” strategies).

-The top three “moderate-risk” strategies have a Beta of .296.* The average annual return for their top five “moderate-risk” managers going back seven years is 15.29%* net of fees* (again truly incredible for “moderate-risk” strategies).

*Click on the following link to download a summary of the annual returns and risk metrics (like Beta) of POM Planning’s 13 tactically managed strategies: Past performance is no guarantee of future results. Investing is risky and investors can and do lose money.


It’s a new day and Series 7 licensed advisors who are used to selling loaded mutual funds or insurance only licensed agents who are used to selling massive amounts of FIAs in IRAs is coming to a close.

One trick ponies (advisors who offer a limited amount of options to clients looking to protect and grow wealth in qualified plans/IRAs) are looking at lawsuits for violating the new DOL fiduciary standard regs.  Advisors who plan on continuing to go after the IRA market better wake up or the DOL may be coming to visit you.

For insurance agents, you better think seriously about getting a 65 license.

For Series 7 licensed, advisors, this is the excuse you need to go independent and get away from your B/D (I know the majority of Series 7 licensed would like to leave their B/D and go “independent).

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Roccy DeFrancesco, JD, CWPP™, CAPP™, CMP™
Founder, The Wealth Preservation Institute
Author of: The Doctor’s Wealth Preservation Guide; The Home Equity Management Guidebook; The Home Equity Acceleration Plan; Retiring Without Risk; Bad Advisors: How to Identify Them; How to Avoid Them; and Peace of Mind Planning: Losing Money is No Longer an Option.