New DOL Rule Already Here?

Numerous times in the past I have said publicly that I don’t think the new DOL rule that’s coming will change much.  While that’s somewhat of an overstatement, my point was made this week by FINRA. 

On November 28, 2016 FINRA fined VALIC Financial Advisors $1.75 million.  The fine was due to VALIC’s sales practices.  In short, VALIC paid its 4,000 member firms more if they put their clients in VALIC proprietary products.  For example, advisors were paid more if clients moved their money into VALIC annuities.  In contrast, advisors were not paid if they moved clients from VALIC products into non-VALIC products.  According to FINRA, such a compensation structure does not ensure that advisors are putting client interests above their own interests. 

The coming DOL rule will mandate (among other things) that advisors put client interests above their own.  FINRA, however, is already taking enforcement action in this regard.  When the new DOL rule takes effect then, the reasons for regulatory punishment may change, but the type of conduct that is prohibited will not.