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Department of Labor Proposed Fiduciary Regulations

A letter from Founding Partner, Jim Pratt-Heaney regarding the proposed changes by the United States Department of Labor and their impact on Coastal Bridge Advisors

The Department of Labor has announced that the implementation of the new Fiduciary Rule, which expands the “investment adviser fiduciary” definition under ERISA and places additional restrictions on the provision of investment advice to retirement accounts, would be delayed.

With all of the news and changes since the election, the proposed changes by the Department of Labor to rules financial advisors to ERISA plans and individual retirement accounts (IRAs) must follow have fallen from the spotlight. However, many of you have asked what these changes are all about and whether you, the client, or Coastal Bridge Advisors would be effected.

Among other things, the new rule applies additional and modified restrictions on compensation received by financial advisers meeting the definition of investment adviser fiduciaries, related to their provision of advice to retirement accounts. These restrictions are subject to the Best Interest Contact exemption. To be eligible for the exemption, financial advisors must:

  • Acknowledges Fiduciary Status. As a Registered Investment Adviser, our firm has always been subject to the Fiduciary standard, so there is no change in this regard. As a Fiduciary, we are bound to know our client and act in their best interest. That is why we have our planning process and update the client’s plan often. Financial advisors who are not fiduciaries are simply required to transact suitable investments.
  • Adhere to basic standards of impartial conduct. One of the major drivers for our firm to go independent was to be free of conflicts of interest related to recommending products created by our brokerage firm . We wanted to be able to research and hire investment managers and other advisors, based on merit and therefore reduce conflicts of interest. So no change for us
  • Warrant Compliance with Federal and State laws Governing Advice. Our compliance program is very vigorous and at the core of our firm. We have had two examinations by the SEC and have an in-house compliance review every year. Our program includes oversight, business continuity plans and data security.
  • Disclose Basic Conflicts of Interest. We strive to be as conflict free as possible, by being independent. If there is a conflict that cannot be avoided, we are sure to disclose them in our documents.
  • Disclose the cost of their advice. As you know, our firm clearly outlines all fees to our clients. That includes our management fee, the investment manager’s fee, our custodian, reporting fee and any other charge that is involved in the management of our client’s financial issues.

The new rule has caused some large firms to make major changes in commissions and advice, but as you see, we already have the above-described practices as part of our normal operation, so we expect few  changes in what we do. Acting as Fiduciaries and trying to be conflict free and transparent is what we do.


*For more on the Fiduciary Rule, turn to President Jeff Fuhrman’s article in Worth Magazine: What is the Standard of Care I Should Expect of my Advisor?

April 2017