Barron’s (June 1, 2017) – ‘When the DOL’s fiduciary rule takes partial effect next Friday, advisors and broker-dealers need to be prepared for heightened legal risks, InvestmentNews writes.

When the DOL’s fiduciary rule takes partial effect next Friday, advisors and broker-dealers need to be prepared for heightened legal risks, InvestmentNews writes.

The rule’s best-interest contract exemption, which gives investors the right to bring class-action lawsuits against financial firms, won’t phase in until January 1. But experts say firms still have plenty of legal and compliance responsibilities beginning June 9, the publication reports.

Next Friday is when all advisors working with retirement accounts will be considered fiduciaries and will have to comply with the rule’s impartial conduct standards requiring them to put clients’ interests first.

“If the advisor is not charging reasonable compensation or not making recommendations that are in the client’s best interest, the broker-dealer is opening itself up to liability,” said John Rooney, managing principal with Commonwealth Financial Network, according to InvestmentNews.

Broker-dealers will need to explain why they select certain funds, Denise Valentine, a senior analyst at Aite Group, is quoted saying. “They have to show care and prudence and why they matched the investor to those funds. They have to show reasonable compensation and that they have made no misleading statements.”

Andrew Stoltmann, a plaintiff’s attorney and president-elect of the Public Investors Arbitration Bar Association, says one area to watch will be IRA rollovers.

“Historically, that has been the biggest saliva-inducing asset that financial advisors want to get their hands on,” he is quoted saying. “That’s where probably 85% of the financial chicanery and breaches of a fiduciary duty would take place.”