United States: The Department Of Labor's Fiduciary Rule – An Overview Of The Marketing And Sales Implications For Investment Managers

Last Updated: September 29 2017
Article by Robert L. Sichel

According to the Investment Company Institute, at the end of the first quarter of 2017, assets in IRAs totaled approximately $8.2 trillion, assets in defined contribution plans totaled approximately $7.3 trillion, and assets in defined benefit pension plans totaled approximately $3.0 trillion.1 The Department of Labor's fiduciary rule will impact the way many investment managers market their products and services to these types of clients. Below is an overview of the fiduciary rule with a focus on the marketing and sales implications for investment managers.

When is an investment manager an ERISA fiduciary?

An investment manager is an ERISA fiduciary when (i) the manager has discretion over ERISA or IRA assets or (ii) the manager provides "investment advice" for a fee (as defined in Department of Labor regulations).

What has changed?

The definition of "investment advice" has changed. The fiduciary rule broadly defines "investment advice" to include tailored investment suggestions. As a result, the timing of when ERISA fiduciary status attaches to an investment manager could be impacted.

Does the fiduciary rule impact discretionary investment managers?

Yes. The fiduciary rule could cause a discretionary investment manager to become an ERISA fiduciary before the investment manager is hired and has discretionary responsibility. For example, while promoting its products and services, an investment manager may provide tailored investment recommendations to a prospective ERISA client. If the investment manager does not take certain steps, the tailored investment recommendations, such as those sometimes included in RFP responses, may constitute fiduciary investment advice.

Does the fiduciary rule impact the distribution of funds that do not hold ERISA "plan assets" (e.g., private funds that limit ERISA and IRA investors to below 25% of the fund and mutual funds)?

Yes. One can become an ERISA fiduciary under the fiduciary rule by virtue of marketing a non-plan asset fund to an ERISA or IRA investor, even though the manager of the fund is not acting as an ERISA fiduciary over the client's assets once the client invests in the fund.

Why should investment managers avoid fiduciary status in connection with sales and marketing activity?

If an investment manager were to become an ERISA fiduciary in connection with marketing its products and services, getting hired and receiving an investment management fee may constitute a prohibited transaction under ERISA. This is because an ERISA fiduciary cannot use its fiduciary authority to cause a plan to pay an additional fee to the fiduciary (or a person in which the fiduciary has an interest which may affect the exercise of the fiduciary's best judgement as a fiduciary).

How can an investment manager avoid fiduciary status when marking its products and services?

There are a few approaches for investment managers to avoid fiduciary responsibility when marketing their products and services to ERISA and IRA clients. The approaches include: (i) ensuring communications are general in nature and not tailored to a specific recipient or recipients, (ii) limiting communications to the provision of investment education and (iii) adhering to the requirements of an exception for transactions with independent fiduciaries (the "independent fiduciary exception").

What is the independent fiduciary exception?

The independent fiduciary exception is an exception to the fiduciary rule that enables parties, such as investment managers, to provide ERISA plans with information and materials that could otherwise constitute "investment advice," without the party becoming an ERISA fiduciary. The requirements of the independent fiduciary exception include the following: (i) the party seeking to rely on the exception must make certain disclosures to the ERISA plan's fiduciary and (ii) the party seeking to rely on the exception must make a reasonable determination regarding the sophistication level of the ERISA plan's fiduciary in connection with investment matters.

Why are some investment managers asking ERISA plans to make representations regarding the fiduciary that is responsible for the plan's investments?

Some investment managers are asking ERISA plans to make representations regarding the fiduciary that is responsible for the plan's investments to enable the investment manager to comply with the requirements of the independent fiduciary exception. These representations may be found in (i) subscription agreements (or supplements thereto), (ii) investment management agreements or (iii) stand-alone notices sent to the ERISA plan, in the form of a negative or affirmative consent.

Why are some investment managers sending notices to consultants and other gatekeepers?

Some investment managers are sending notices to consultants and other gatekeepers to document that such party is acting as an independent fiduciary of ERISA clients. Doing so will enable the investment manager to avoid fiduciary status when marketing its products and services to the consultant's or gatekeeper's clients.

Are investment managers more limited when marketing to smaller retirement plans?

Yes. An investment manager cannot rely on the independent fiduciary exception, if the client's fiduciary, such as an investment committee, has less than $50 million in assets under its management and control. If an investment committee has responsibility for multiple pools of assets, the pools can be aggregated for purposes of this test. For example, if an investment committee is responsible for a $30 million welfare plan and a $40 million retirement plan, the $50 million test is met. If the investment committee does not meet the asset under management or control test, marketing and sales communications with the investment committee would not fall under the independent fiduciary exception. In that situation, an investment manager may direct marketing or sales-type communications only to the plan's consultant, if any, to avoid providing fiduciary investment advice. Alternatively, an investment manager may look to comply with the new best interest contract prohibited transaction exemption.

Could the fiduciary rule be rescinded or amended?

Yes. There is a high level of uncertainty regarding the ultimate fate of the fiduciary rule. The Department of Labor is engaging in an analysis of the issues raised in the President's February 3, 2017 Memorandum which directed the Department of Labor to conduct an examination of the fiduciary rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice. As part of this effort, in June, the Department of Labor issued a request for information seeking public input that could form the basis of new exemptions or changes to the fiduciary rule and already issued exemptions.

On July 19, the House Education and Workforce Committee marked up H.R. 2823, "Affordable Retirement Advice for Savers Act" and voted to move it forward along party lines. The bill would rescind the fiduciary rule, restore regulations and exemptions that the fiduciary rule removed or modified, and establish a statutory definition of investment advice. Separately, the House Appropriations Committee considered and approved a draft funding bill for the Department of Labor that currently contains a rider that would repeal the fiduciary rule. There are also several legal challenges to the fiduciary rule that are currently winding their way through the court system.


1. Investment Company Institute, "Retirement Assets Total $26.1 Trillion in First Quarter 2017", available at: https://www.ici.org/research/stats/retirement/ret_17_q1.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.