Speculation about delays in the implementation of controversial and long-anticipated Department of Labor fiduciary rules may have some credit unions wondering whether to ease up on efforts to prepare for new compliance hurdles, but two experts say credit unions probably shouldn’t take its foot off the gas pedal right now.

The rules generally revolve around redefining which kinds of financial professionals are subject to fiduciary best interest standards, as well as when it's OK to provide what the Employee Benefits Security Administration calls “conflicted advice” – recommendations from advisors who receive compensation that depends on the actions of the advisee, such as loads, revenue-sharing payments, finder’s fees or commissions.

Advisors receiving fees or compensation for investment advice or recommendations to a plan, plan fiduciary, plan participant or IRA owner would be fiduciaries, the Department of Labor noted. A fiduciary can be a broker-dealer, registered investment advisor, insurance agent, pension consultant or other type of advisor, it said. The rules are supposed to apply starting April 10.

But credit unions shouldn’t pump the brakes now because of a delay or possible repeal, CUSO Financial Services EVP and Chief Compliance Officer Peter Vonk said.

“My advice would be for firms to continue with the efforts that they have started or have in many cases already brought to fruition, to continue to promote any activity that allows you to engage with clients in their best interest, to disclose such to them, the further explain potential conflicts and how those are mitigated and to best document your relationship with clients and what they can expect of you and what you can expect from them,” he explained.

Jim Burson, a senior director at Cornerstone Advisors, had similar advice for credit unions.

“If I was sitting at the top of a credit union, I would probably strategically proceed toward an advisory-based model as opposed to a transaction-based model. What that means is, I may not have to update my website and all of those types of things, but I do have to update how I think about going to market,” he said.

“Then, as needed, deal with my website or those other things. They already have advisory-based disclosures, they already have all of those things in place, it's just their current business mix tends to skew transactional. It's not like they have to do anything to shift to an advisory model other than to change the mind-set of how they want to interact with members and how they want to say they earn their income to take more of a financial planning approach,” Burson added.

Financially, some credit unions could take a short-term hit by moving to an advisory-based model, and Burson is okay with that.

“The DOL fiduciary rule basically says you have to do what's right for the member,” he said. “Why is that a bad thing? It's a bad thing for a couple of reasons for several credit unions from an income point of view, but from a strategic point of view, I'm not sure that the delay should really matter one way or the other.”

“If it gets killed, or deferred, or parts of it go away, nothing in that journey to start changing how you think about your income and how you earn income from the business is going to go away,” he said.

Instant Insights /

Delay in Fiduciary Rule Should Not Delay CU Action, Pros Say

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