The Household Balance Sheet℠ View and the DOL Fiduciary Rule

The headliner of our conference in July was clearly Marcia Wagner, who talked with us about not only the letter of the DOL fiduciary rule, but also the spirit of the regulation.  Marcia’s law firm, the Wagner Law Group, focuses on ERISA regulation and has in fact created one of the largest bodies of case law on that topic.  She has emerged as one of the foremost legal experts on the DOL fiduciary rule, helping advisers and their firms navigate and interpret the new requirements.

Marcia outlined how the work that RIIA®’s work over the past ten years has already laid the groundwork to provide the same level and flavor of service that the DOL regulation is attempting to instill in advisers today.  The DOL fiduciary requirement is, at its core, a requirement that the adviser truly understand the client, collect all the information needed in order to give prudent advice, and follow a process that is documented sufficiently to show that the information was collected and appropriately interpreted.

RIIA’s Household Balance Sheet and Procedural Prudence℠ map may have preceded the DOL regulation, but Marcia pointed out all the various ways in which they achieve precisely what the DOL is aiming for.

The Household Balance Sheet is a perfect example of both the data collection and documentation responsibility.  It does three things: identifies the client’s capital (human, social and financial), collects all known and potential liabilities, and creates present values to equate the two.  It represents a complete financial picture of the client’s needs and objectives, and qualifies as a client information gathering and financial planning tool consistent with ERISA prudence standards.  In addition, the input process provides key information that allows advisers to give appropriate consideration to the client’s needs and objectives and all relevant information when creating a retirement plan and making investment recommendations.  It also facilitates planning for risk management and cash flow optimization, not just investment planning.

The Procedural Prudence map serves as a checklist to ensure that the investment adviser took the time to consider all relevant risks and the range of investment options available to the client before recommending the best interest contract for their situation. Together, the Household Balance Sheet and Procedural Prudence map help advisers offer prudent and complete advice to their clients, even in the midst of the confusing and conflicting issues that accompany retirement planning. This has always been the goal of RIIA, and Marcia’s comments at the conference made it clear that RIIA’s goal is now shared by the DOL.

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