Proactive retirement planners may have already heard about the Department of Labor’s recent release of the first in a series of FAQs regarding the new rule called the Best Interest Contract Exemption” or BICE. BICE, which goes into effect in April 2017, regulates the business transactions of financial services advisory firms and financial services advisors. If you are wondering how the rule may impact your self-directed IRA (or any other financial service vehicle such as a traditional 401k), you are not alone. There are still many questions remaining regarding the logistics of implementing BICE, not to mention its potential implication on financial markets.
But there are some things we do know, for example the rule’s intention is to protect investors from predatory advisors that try and steer their clients towards making choices that offer the biggest benefit to the advisor, even if it’s not the best choice for the investor. As many of you are investors ourselves, we’re sure you appreciate the value of that goal. Another thing we know is that the rule will expand the definition of “fiduciary” to include any financial professional who works with IRAs, or other qualified retirement plans. The term “fiduciary” and all the responsibilities that accompany that designation will also include anyone who provides advice or recommendations pertaining to IRA Rollovers, regardless of how that person is paid and whether or not they themselves handle the assets in question.
BICE is a complicated rule, and as the DOL states in their blog, there are still many questions that need to be resolved about what implementation will look like for different types of financial advisors and financial advisory companies. As the date it goes into effect draws nearer, we can expect to see additional clarifications from the DOL regarding exemptions from the fiduciary status designation, as well as predictions from all sorts of stakeholders speculating on the impact the rule may have on their businesses and the health of the retirement planning industry. But despite all the unknowns, there are some things you can do to make sure you’re met with any unpleasant surprises once the law takes effect:
- Talk to any and all investment professionals you work with. Ask them if they are impacted by BICE and if so, how you can expect to see that impact reflected in the services they currently provide you.
- Take the time to review all your existing investment accounts and understand what stage they’re in– are you still contributing money? How long until you start having required minimum distributions? What types of assets do you have the most exposure to? Once you have answers to these questions you will have more insight into what opportunities might be best for to look into both before and after the rule goes into effect.
- Pay attention to the information that the DOL is releasing. They have made it clear that the FAQ released at the end of February is just the first in a series. Check in with any financial services professionals you work with after each update to see if they’ve been impacted by new adjustments or can help you understand if and how the revisions impact you.
At this stage, there are too many undecideds and unknowns to speculate with any confidence on the overall impact of BICE on either you as an investor or on financial services professionals and their business operations. But with a little preparation, you can make sure you are as protected as possible from any hiccups or surprises that may result from the uncertainty surrounding BICE and the logistical challenges of its implementation.