Category Archives: DOL Fiduciary Rule

What’s New with the DOL Fiduciary Rule?


What’s New with the DOL Fiduciary Rule?

June 23, 2017 | by Beth Glavosek | Blue Vault 

Law gavel with dollars on wooden table background, closeup

Have you been keeping up with the status of the Department of Labor’s (DOL) Fiduciary Rule? After years of contentious debate between government regulators and financial industry professionals, the controversial ruling basically went dormant for a while after President Donald Trump took office.

Forbes reported earlier this month that the investor protection rule did go into partial effect on June 9, and that, in the transition period, the rule really has “no bite” because the Department of Labor says it won’t enforce any parts of the rule until January 1, 2018.

According to the DOL, during the phased implementation period that now ends on January 1, 2018, “The Department will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions, or treat those fiduciaries as being in violation of the fiduciary duty rule and exemptions.”

In other words, no news is good news for those firms grappling with DOL compliance. For a complete FAQ from the DOL, you can catch up on the latest here.


DOL fiduciary rule: When advisers actively seek to use BICE

DOL fiduciary: The battle is just beginning

Ameriprise Cuts Offerings Ahead of DOL Rule

LPL Caps Non-Traded REIT Pay Ahead of DOL Rule, Delays Off-Platform Fund Ban

What are Subordinated Investments?


What are Subordinated Investments?

April 6, 2017 | by Beth Glavosek | Blue Vault

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The topic of fiduciary responsibility is on everyone’s minds this year. One unique approach to protecting investors’ interests is subordinated co-investing. It’s one possible way to address the mandates for transparency and fiduciary responsibility imposed by FINRA’s 15-02 rule and the pending Department of Labor (DOL) Fiduciary Ruling. Several product sponsors have employed this approach.

So what are subordinated co-investments? In simplest terms, it means that the sponsor is contributing its own money to the offering in order to offset investor fees. It also means that the sponsor has a vested interest – or ‘skin in the game’ – to manage the REIT fairly and prudently. Sponsors will only receive their upfront co-investments back after investors have gotten a complete return of capital plus a preferred rate of return. From a risk perspective, if the investment fails, the sponsor loses its money before anyone else does.

If, for example, a sponsor pays $36 million into its product offering and the investment somehow loses $30 million, investors would still receive their capital and preferred return back. The sponsor would take the hit of $6 million in loss.

It’s a novel approach that not only expresses confidence in the company’s investments; it also overcomes the DOL and 15-02 hurdles.

Here are the important points for advisors to understand about how subordinated co-investment overcomes 15-02 and the DOL rulings.

  • FINRA’s 15-02 rule was about disclosing on client statements the impact of fees and how they reduce the amount of investor capital that actually gets invested. A sponsor’s subordinated co-investment effectively covers these fees by committing funds that directly offset them. As a result, broker-dealers and advisors continue to receive standard compensation, and 100% of the client’s proceeds are invested immediately ‘in the ground.’ Clients will continue to see the stable share price that they paid on their statements, unless there is a valuation that changes the share value.
  • With regard to the DOL’s fiduciary standards, the ‘first loss’ position addresses the issues of risk tolerance and will assist advisors in securing a Best Interest Contract Exemption (BICE). Therefore, they should be able to continue to earn a reasonable commission for their services.

We will see if the trend of subordinated co-investing continues to gain traction, especially if the DOL ruling does eventually go into effect.

It’s a Fiduciary World After All


It’s a Fiduciary World After All

February 16, 2017 | by Beth Glavosek | Blue Vault

Law gavel with dollars on wooden table background, closeup


The Department of Labor (DOL) Fiduciary rule conversation appears far from over now that new executive orders have potentially halted the rule’s implementation.

As reported last week, President Donald Trump ordered the Labor Department to sideline the fiduciary rule for further review, a move that could provide a window to delay or kill the regulation.

What about all of the work that advisor firms have already done to be prepared for the original implementation date of April 10, 2017? Many industry professionals do not feel that the efforts are wasted. Regardless of the DOL rule’s ultimate outcome, the lengthy debate that led up to the final ruling in April 2016 highlighted the importance of implementing uniform investor protections in some form.

According to Wealth Management, Dale Brown, president and CEO of the Financial Services Institute (FSI), recently said,“[Even] if we achieve a delay or repeal of the rule through executive, legislative or judicial means, no one should expect that we will simply revert to the status quo. This fiduciary world is our ‘new normal’.”

So what are some significant outcomes of the rule that will likely have a lasting effect on the advisory world?

  • A wider variety of share classes. The A share (upfront load) now competes with a whole alphabet of share types, including P, T, and Z. Janus, for example, filed with the SEC to launch P and Z share classes in an effort to “give lower sales charge options to its intermediary partners,” according to
  • Clearer disclosure of compensation. As part of a workable alternative to the existing rule, FSI believes that more robust disclosures about advisor compensation will help meet some of the goals of the DOL’s fiduciary standard.
  • Flexible business structures. Financial advisors are freer than ever to set up their businesses how they want them—whether they take full upfront fees, smaller upfront fees plus a trail, or a separate commission altogether. One new trend is the aforementioned Z share—also known as the ‘clean’ share— which sells the investment product’s shares as no-load, yet allows for the advisor to collect a separate commission or sales charge.

It should be noted that Registered Investment Advisors (RIAs) are already considered fiduciaries. However, they could still be affected by the current DOL rule if they offer advice that opens up a new revenue stream for them, such as rollovers or the like.

We will keep you updated as events unfold and the ruling—whether implemented literally or in spirit—takes effect.

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