With what Labor Secretary Thomas Perez called a keen ear andhealthy dose of humility, the Department of Labor finalized afiduciary rule after making what he called substantial changes tothe proposed version.

Never a fan of the suitability standard that has guided thebrokerage advisory industry to date, Perez implied the final rulemakes good on his commitment to slow down the rulemaking processand fully consider stakeholders' concerns, a pledge he made tolawmakers during his confirmation hearings.

For Perez and the DOL, the challenge of writing a rule thatwould insist on a fiduciary level of care for advisors to most401(k) plans and all IRA accounts was never about bad people doingbad things,” but rather the heart of the challenge was thatadvisors have been operating in a structurally flawed system.

“I'm confident the industry will be able to comply, and lookforward to constructive engagement going forward,” Perez said.

Here is a look at some of the core changes made in the finalrule, made after the DOL considered more than 3,000 comment lettersand more than 100 meetings with stakeholders.

1. ImplementationDate

The final rule extends the eight-month implementation date firstproposed and gives advisory firms more time to fully comply byphasing in compliance requirements.

In April 2017, the rule's broader fiduciary definition will takeeffect, but firms will only be required to comply with limitedconditions of the Best Interest Contract Exemption by then,including acknowledging their fiduciary status and disclosingconflicts of interest.

Then, firms will have until Jan. 1, 2018 to fulfill theremainder of the BIC exemption's requirements, according to a WhiteHouse and DOL fact sheet.

2.Clarifying What Constitutes Investment Advice

Numerous stakeholders raised concerns throughout the rulemakingprocess that the proposed rule would greatly restrict providers'education efforts by making the distribution of basic information afiduciary act.

The final rule defines various education activities that fallshort of “fiduciary conduct,” according to the DOL.

Fiduciary investment advice will not include “communicationsthat a reasonable person would not view as an investmentrecommendation.”

That includes general newsletter, media appearances, researchreports and general marketing materials.

3. BestInterest Contract Exemption

The most controversial provision of the proposal, in the eyes ofmany stakeholders, has been streamlined, according to Labor Sec.Thomas Perez.

Providers of proprietary products, which Perez said “have animportant place in the marketplace,” will be able to use the BICexemption on the products they recommend, so long as therecommendations are in investors' best interest.

“Best interest does not mean the lowest priced product,” Pereztold reporters.

4.Seller's Carve-Out

The proposed rule said advisors to 401(k) plans with less than100 participants or $100 million in assets will have operate underthe BIC exemption.

The final rule lowers that threshold to $50 million inassets.

5.Expanded Products

The proposal listed products that could be recommended. Thefinal rule removes that list.

6.Streamlined BIC Exemption: Lower Compliance Cost, Allow forCommission-Based Products

Sponsors of ERISA plans must acknowledge they and advisors areworking as fiduciaries when providing investment advice, but nosigned contract will be required of participants.

For IRA accounts, the final rule provides for flexibility onwhen the BIC contract can be signed. Now, the rule says thecontract can be signed at the same time as other opening accountdocuments, and not as soon as a client walks in the door. Butadvice given before the contract is signed will still be covered bythe agreement.

Existing IRA clients will be able to agree with the BIC contractby “negative consent.”

7. OnlyOne Contract Required Between Firm and Client

The final rule addressed providers' concerns relative to callcenters by only requiring one contract signed between the providerand the client.

In other words, clients won't have to sign a new contract everytime they speak with a different adviser at a call center.

8.Simplified Disclosures

The proposal's requirement to provide one, five and 10-yearinvestment projections has been removed from the final rule.

Transaction disclosures will require firms to explain conflictsof interest. But the annual disclosure requirement in the proposalhas also been eliminated.

9. Streamlined Level FeeProvision

Advisers charging a “level fee” will not have to enter into theBIC exemption with clients, so long as they document certainrecommendations, like rollovers to IRAs, are in a customer's bestinterest.

10. GrandfatheringExisting Investments

The final rule clarifies that compensation can be received frompreviously acquired assets, under previous compensationstructures.

The provision includes protections for recommendations to holdassets in those investments, but requires that any additionaladvice on those assets satisfy the rule's best interest standardand reasonable compensation requirements.