Paychex Solution Aids Fiduciary Rule Compliance

Advisers who are worried about getting their practices in line with the fiduciary rule can leverage a newly unveiled solution from Paychex. 

Paychex Inc. announced a new solution to assist financial advisers in meeting the requirements of the strengthened fiduciary rule.

According to the industry’s initial interpretation, the final rule reflects a lot of the feedback the Department of Labor (DOL) received during the public comment periods—much of it asking for portions of the rule to be softened and adjusted. Paychex says, on its primary analysis, several key changes from the DOL’s initial proposal have apparently been made, including clearly defining activities that constitute non-fiduciary investment education; allowing a person or firm to recommend a prospective client hire the adviser or firm without it necessarily being considered a fiduciary recommendation; allowing asset-allocation models and educational materials to reference specific products without it being considered fiduciary advice; a simplified Best Interest Contract (BIC) exemption; and a phased implementation period, which mandates the broader definition of fiduciary take effect by April 2017, and most other requirements take effect by January 1, 2018

“Throughout the rule’s comment period, Paychex planned for the potential outcomes,” explains Paul Davidson, director of product management. “With adaptable products and solutions, we’re ready to support financial advisers in meeting these new obligations.”

Specifically, the new solution helps advisers with the following:

Return of Revenue Share: The Paychex Return of Concessions feature (ROC) supports fee transparency, share class neutrality and fee levelization. With ROC, Paychex does not retain any form of revenue-sharing payments or “concessions” that investment companies routinely pay to 401(k) plan recordkeepers or third-party administrators. Instead, these concessions are returned to participant accounts.

Investment Oversight Options: Paychex is providing choices that help financial advisers mitigate the risk of investment selection and monitoring, including 3(38) options that provide third-party selection and oversight of plan investments, and coming this fall, 3(21) options that provide fiduciary oversight of investments while offering more flexibility to choose investments within a smaller set of funds that are consistent with the fiduciary’s investment strategy.

Level Fee Payments to Investment Advisers: Paychex is working closely with its broker/dealer partners to verify that all plans pay equal adviser compensation on all plan investments by the date set forth by the DOL. “We have and will continue to put controls in place to assist advisers in complying with broker/dealer requirements,” the firm concludes.

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