DOL's Gomez Lays Out Fiduciary Rule's Chief Goals

“In the words of ERISA and the [IRS] code, in such circumstances you should be treated as a fiduciary,” she added

Second, “advice fiduciaries should uniformly adhere to a few basic principles,” according to Gomez. “Their advice should be prudent — meaning that they should adhere to an expert standard of care. Their advice should be loyal — meaning that their customers’ interest must come first.

“In other words, recommendations should be based on what’s in the financial interest of the investor, not the competing financial interest of the professional making the recommendations,” she noted.

Recommendations, Gomez continued, “should be free from misleading statements or misleading information about the investments, their services, fees and other relevant information, and investors should not be overcharged for the advice provider’s services.

“At bottom,” Gomez stated, “this proposed regulatory package simply requires that people who hold themselves out as fiduciaries adhere to these basic fiduciary principles.”

The rule, Gomez continued, “requires the financial institutions that oversee those professionals to have policies and procedures in place to ensure that these basic principles are met. In other words, policies and procedures that take conflicts of interest seriously and ensure that recommendations are prudent, loyal, candid and free from overcharges.”

Third, the proposed rule “is based on recognition that it is very hard for ordinary investors to manage retirement savings,” Gomez stated. “Investment products, strategies, fees and services are complex and often subject to very significant conflicts of interest, which can bias the advice investors receive.”

The fiduciary plan also aims to ensure that “a common regulatory framework apply to all advice by trusted advisors regardless of the type of investment product, the type of investment professional making the recommendation, or who is receiving the advice,” Gomez explained.

“Surely, whether one is recommending an annuity or stock, working on a commission basis or for a fee, the recommendation can and should reflect the best interest of the customer — that is, it can be prudent, loyal, candid and free from overcharges,” she said.

(Credit: Chris Nicolls/Adobe)