A Quick Guide to Understanding Fiduciary Definitions

fiduciary-duty-imageAs it stands today, the Department of  Labor’s (DOL) Fiduciary Conflicts of Interest Rule is set to take effect on April 10, 2017. As with most new rules or regulations, there are a lot rumors and speculation surrounding how the rule will be applied and who will be impacted. If you are a plan sponsor of a qualified retirement plan, like a 401(k), then now is the time to educate yourself as to who is working with the plan and how his or her role will be impacted by this rule. Here are the definitions of some commonly used terms that are associated with the rule.

Glossary of Terms: DOL Fiduciary Rule

Best Interest Contract Exemption
This provision of the DOL rule requires an advisor to enter into a written agreement with a client before advising him or her and receiving commission-based compensation. The agreement should confirm the advisor will act in the client’s best interest and disclose any conflicts of interest that may exist.

This type of compensation pays a percentage of a product sold on each transaction. Trails are a form of recurring commission that pays a stated percentage annually for a sale made in the past.

Department of Labor (DOL)
The United States DOL oversees services and advice provided to retirement accounts, and it is one of the agencies responsible for enforcing ERISA. The DOL has proposed this revised fiduciary rule with the goal of expanding protection for clients’ retirement assets.

Employee Retirement Income Security Act of 1974 (ERISA)
ERISA regulates and protects retirement assets by establishing rules that plan fiduciaries must follow.

In fee-based accounts, advisors charge a management fee based on the amount of assets. The opposite form of compensation would be transaction based, such as commissions.

In qualified retirement plans, advisors charge a fee for services provided. The fee may be based on a percentage of plan assets or a flat fee.

ERISA defines “fiduciary” as anyone who exercises discretionary authority or control over a retirement plan’s assets or provides investment advice to a plan. Fiduciaries are held to a higher standard of accountability than are brokers, and they are required by law to act in the best interest of their clients. The DOL rule seeks to expand the definition of fiduciary to anyone providing advice on retirement plans.

A suitability standard requires advisors to reasonably believe their recommendation will meet a client’s needs, given the client’s financial situation and risk tolerance. This standard is not as strict as a fiduciary standard.

If you are feeling a bit overwhelmed or confused by what is involved, you are not alone and we are here to help. Please contact me at jamie@grinkmeyerleonard.com or 205.970.9088 to learn more.

October 16th – It’s the most wonderful time of the year…for accountants

Untitled design-2People often forget that for the accounting profession, this time of year can be very chaotic. The September and October 15th deadlines create a couple of months of heightened stress.  Everyone thinks April 15th ends the long days until New Years but accountants and anyone  lives with them knows better.   October 16th marks a big sigh of relief from accountants and CPAs (and their families).

We want to offer a list of things to do after October 15th to unwind and relax.  You deserve it!

  1. Catch on up world events.  Did you know Apple released the IPhone 6s while you were buried in tax forms this fall?
  2. Go to the movies.  The newest Hunger Games sequel should be out soon.    Aren’t you glad you  are an accountant instead of an actuary.   Can you imagine how many times people say to them, “May the odds be ever in your favor.”?
  3. Dine out.  Red Lobster is offering endless shrimp for a limited time only.   Better hurry.
  4. Watch the tube.   Now would be a perfect time to watch those Presidential debates that you DVRed.  If you haven’t grinned in a while, The Donald ought to elicit some stress-relieveing laughs.    The hair alone is worth a good chuckle.
  5. Start your Christmas shopping.   Only 70 days until Christmas.  Wait, scratch that as relaxing – THERE ARE ONLY 70 DAYS UNTIL CHRISTMAS!   Perhaps you should grab a glass of wine (or 2) and start cruising Amazon to get that shopping started.
  6. Spend some time with your spouse/significant other.   In case you are unsure, it is that person that sleeps on the other side of the bed from you.
  7. Visit with friends over coffee.   You probably haven’t heard but Starbucks has their Pumpkin Spice Lattes back on the menu.
  8. Play with your kids.  Remember those cute little humans running around your house that you’ve been “shhhhhing” the last several months; they are in fact fun to play with.  And they’ve missed you.
  9. Take a vacation.  Your next couple of months should be much slower.   Vacation deals are plentiful during hurricane season.   (another benefit of your career that no one told you in college)
  10. Throw a party!  Have fun.  You deserve it.  You have worked hard, now play hard.   Enjoy time with your family and friends.   Savor every moment of the holidays with loved ones because…tax season starts up again in January.

In January, we are offering an exciting leadership education for that will be eligible for continuing education credits in Mobile that coincides with the Reese’s Senior Bowl and Mardi Gras.     Space is limited.   Email us for more information: info@grinkmeyerleonard.com

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162

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