Yesterday, the Department of Labor (DOL) released the final version of its new rule imposing a fiduciary standard on investment advice related to retirement savings. The rule (DOL Fiduciary Rule), which is the culmination of a long and highly contested rulemaking process spanning seven years, will apply to all advisors providing advice to investors in qualified retirement plans, including IRAs. The DOL released FAQ, a Fact Sheet and a chart comparing the DOL Fiduciary Rule to its earlier proposal.
NAREIT is currently analyzing the complex DOL Fiduciary Rule to assess its impact on REITs, REIT sponsors and investors. It appears that the DOL Fiduciary Rule includes important modifications, including some sought by NAREIT’s Public Non-listed REIT (PNLR) Council. Nevertheless, imposing this fiduciary standard on advisors providing retirement advice to investors using IRAs represents a fundamental shift and may well result in significant restructuring of the business operations of many advisors, asset managers and sponsors of financial products.
An earlier version of the DOL Fiduciary Rule omitted PNLRs and similar products from a “permissible” asset list, which would have effectively prohibited future sale of PNLRs into qualified plans under a key “Best Interest Exemption.” NAREIT’s PNLR Council, working with industry colleagues, including the Investment Program Association (IPA), the U.S. Chamber of Commerce, the National Association of Realtors (NAR) and others, submitted two sets of comments to DOL objecting to this “per se” exclusion. Noting the strong opposition to these limits on retirement saving options in the comments it received, the DOL eliminated this list in its final Fiduciary Rule. The DOL Fiduciary Rule permits retirement advisors to recommend both listed REITs and PNLRs to retirement investors so long as the Best Interest Exemption is met.
The DOL Fiduciary Rule, which will begin to take effect in April 2017 and become fully effective on January 1, 2018, includes other changes sought by NAREIT and its industry colleagues, including important clarifications of the transition rules applicable to investors currently holding PNLRs in their retirement portfolios and fewer restrictions applicable to advice applicable to fee-based products generally.
Though the DOL Fiduciary Rule reflects important changes, including some beneficial to PNLRs, representatives of the asset management and advisor industries have raised fundamental concerns about it, including the propriety of DOL moving forward before the Securities and Exchange Committee (SEC) considers the broader question of the standards applicable to investment advisors generally. Several bills aimed at preventing the DOL Fiduciary Rule from taking effect are currently pending in Congress.
For further information, please contact Victoria Rostow, Senior Vice President, Policy & Regulatory Affairs, firstname.lastname@example.org.