Best Interest Contract Exemption

The long disputed regulation of advice to IRA and ERISA plans appears to be ending and the requirements are likely to be put into effect within months. The reality that the Best Interest Contract Exemption (“BICE”) will lay down certain conditions for advisors to continue to receive compensation will mean that financial advisors must make a number of hard choices about the way they operate.

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Best Interest Contract Exemption

Checklist of Popular Provisions and Protections

By Louis S. Harvey | Published by Dalbar | Oct 16, 2016

The DoL Fiduciary rule requires enforceable contracts with stipulations of fiduciary responsibility, prudence, non-excessive fees and warrantees against conflicts of interest as well as no prohibition against joining class action litigation. These radical requirements are new, difficult to interpret and have no precedents from which to draw. Industry experts are continuing to uncover hidden threats and challenges every day. DALBAR offers a checklist that incorporates the latest thinking to minimizing the risks of the unknown that are inherent in this complex new regulation. There is no charge to download the Checklist.

By Louis S. Harvey | Published by Dalbar | October 16, 2016

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Excessive Compensation Prohibition

By Louis S. Harvey | Published by Dalbar | Sept 24, 2016

The DoL Fiduciary Rule (“Rule”) prohibits advisors from receiving excessive compensation from any IRA or ERISA Plan for both existing and new business! While there are many exemptions and exceptions built into the Rule, there is one common mandate:

  • No compensation in excess of what is reasonable for the services provided.

Prohibition of Excessive Compensation of the Rule applies to:

  • Existing and new business
  • No-conflict arrangements
  • Best Interest Contracts
  • Level Fee Arrangements
  • Annuity Products
  • Robo Advisors

Resolving excessive compensation can be a lengthy process and must be started immediately to achieve the applicability date of April 10, 2017...

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The Work Behind BICE Paperwork

By Louis S. Harvey | Published by Dalbar | Aug 23, 2016

Complying with the Best Interest Contract Exemption (“BICE”) requires a mountain of paperwork that commits, promises, and makes disclosures. Developing this paperwork is an enormous challenge but standing by the commitments, promises and maintaining accurate disclosures present an even greater burden for Financial Institutions and Advisers

The structure of contractual commitments, promises and disclosures was designed to make it easy for plaintiffs to win cases against Financial Institutions and Advisers. With an enforceable contract in place there is no longer a need to show malicious intent or a violation of complex laws. Any client can win a case in virtually any court if the contract terms are violated...

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Three Phases of Retirement Advice

By Louis S. Harvey | Published by Dalbar | Aug 23, 2016

The obligation of the independent expert and independent auditor (“Examiners”) is to assess compliance with the 408(g) regulation. This includes consistency with the PPA’s intent:

  • Responding to the need to afford participants and beneficiaries greater access to professional investment advice, Congress amended the prohibited transaction provisions of ERISA and the Code, as part of the Pension Protection Act of 2006 (PPA), to permit a broader array of investment advice providers to offer their services to participants and beneficiaries responsible for investment of assets in their individual accounts and, accordingly, for the adequacy of their retirement savings....

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Ready or Not: Here Comes BICE DALBAR Announces Tools & Training

By Louis S. Harvey | Published by Dalbar | 2016

The most basic choice is whether financial advice will remain a core part of a Financial Advisor’s business in which case the BICE requirements can be avoided. The alternative of being compensated for giving advice requires meeting the BICE requirements.

  • “As the regulatory changes under consideration by the Labor Department and IRS get closer to reality the discussion must shift to how to operate successfully in the new environment,” said Cory Clark, Head of Research & Due Diligence at DALBAR...

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Best Interest Contract Solution For Broker/Dealers

By Louis S. Harvey | Published by Dalbar | 2016

New Federal Regulations for Advisors (Best Interest Contracts) must have a customized integrated automated system to comply with its complex rules and requirements, avoid risks of inconsistencies, save time through automation, operate profitably with proper oversight and adequate controls and compete in the new technology era...

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Creating a Successful Best Interest Contract (BICE) Practice

By Louis S. Harvey | Published by Dalbar | 2016

The battle may be lost or at best, the odds of winning are low. The Obama administration’s proposal for financial advisors to forfeit compensation unless the FA can demonstrate that his/her actions are in the client’s best interest seems certain...

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Choices and Solutions

By Louis S. Harvey | Published by Dalbar | Sept 24, 2016

The Fiduciary Rule is now the “Law of the Land” and financial service institutions and professionals must choose a future course of business…

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BICE Requirements Summary

By Louis S. Harvey | Published by Dalbar | 2016

This summary is intended to outline the possible actions that are required and those that are optional for a successful implementation of the BICE regulations. Specific firms may require certain actions that are optional from a regulatory perspective...

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The Work Behind BICE Paperwork

By Louis S. Harvey | Published by Dalbar | Sept 6, 2016

In the era when the contractual obligation is to act in the client’s best interest, investment decisions can no longer be based on the judgement of the individual advisor or a policy of the advisor’s firm. In the case of the advisor’s judgement, an enormous business risk is introduced if two clients with similar circumstances receive contradictory recommendations from advisors of the same firm...

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Lou Harvey: Obama Just Blew Up Your Business Model; Here’s What to Do

Published by Thinkadvisor.com | Sept 24, 2016

By Gil Weinreich Former Editor-in-Chief Research Magazine thinkadvisor.com

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Beating Swords Into Plowshares… Commentary on the DoL Fiduciary Rule

By Louis S. Harvey | Published by Dalbar | Aug 23, 2016

Beating swords into plowshares is an ancient approach to finding peace and is the new direction of advisor regulations. Except in our case, the result is not peace but an extended war between industry and regulators. The trend in regulation is to dull the motivation of financial advisors by neutralizing the rewards for success...

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Death by Benchmarking (Compensation)

By Louis S. Harvey | Published by Dalbar | Sept 6, 2016

While far less torturous than the Imperial Chinese method of execution known as “Death by 1000 Cuts” (Ling Chi), the use of calculated benchmarks to comply with the compensation restrictions in the new fiduciary rule is just as devastating to the advisor community...

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