Broadridge Financial sponsored a webinar looking at how the new fiduciary rule will affect 10 of the best practices it has laid out for how retirement plan providers, including advisers, should interact with participants.
The firm found that only two, associated with documentation, will be positively impacted by the new rule. Four will be negatively impacted, and it is uncertain how the other four will be impacted, said Cindy Volker, senior director with Broadridge Financial in Baltimore, Maryland. So, essentially, advisers and providers need to reexamine all of the ways they communicate with participants.
The most critical component of the new rule is that it turns any interaction, even a one-time contact, with a participant into a recommendation and, therefore, a fiduciary act, said Cynthia Hayes, president of Oculus Partners, a retirement consultancy in Atlanta. “This rule will have far-reaching implications for the retirement plan participant experience,” she said.
Therefore, documenting interactions with participants is critical, which will make two of Broadridge’s 10 best practices—dashboards and analytics, and engagement tracking—positive assets, Volker said.
The rule will cause anything that can be interpreted as advice to become advice, she added. Thus, best-next-step messaging, multi-channel experiences, life-event content and “people-like-me” benchmarks will become potential fiduciary risk tension points. Broadridge is unsure whether automatic programs, income projections, interactive calculators and financial wellness programs will fall under the radar of the Department of Labor fiduciary rule, Volker said.
“The industry cannot afford to let the rule completely derail America’s ability to retire,” Hayes said.
NEXT: How to hedge the new rule
The first thing advisers and providers need to decide under the new fiduciary rule is whether they want to be fiduciaries, Hayes said. Next, there are 10 ways to prepare to be compliant with the rule, she said.
First, with the help of legal counsel, look at all of your participant communication materials and interactions to determine whether anything could be construed as a recommendation, Hayes said. Next, review all of your participant experience materials to see if they fit with your decision to be a fiduciary or not. Third, “verify that your participant experience designs and materials align with any exemptions of which you might be taking advantage,” she said.
Fifth, with regards to distributions and rollovers, “determine how you will get the information necessary to make sound fiduciary recommendations regarding plan distributions, or what you will change to avoid making a recommendation,” Hayes said.
you currently refer participants to an adviser who will act as a fiduciary,
determine if that referral now falls under the new definition of a fiduciary,”
she said. Next, to manage litigation risks, “ensure that you have documented
processes in place to perform or avoid fiduciary activities.”
Eighth, define the processes you use to make decisions and warehouse the materials supporting them. Ninth, enhance sponsor support by discussing with plan sponsors and advisers the “level of involvement and oversight they want to have with participants going forward.”
And finally, “discuss with plan sponsors how these changes will impact your ability to engage with participants and improve their outcomes, and how you will measure that going forward,” Hayes said.
Without question, she concluded, “this regulation will impact all providers in terms of how you interact with participants. We believe that plan sponsors are going to be more sensitive to this. If they aren’t, their advisers are going to make them aware of it, and this provides advisers the opportunity to offer a great value-add.”