The Department of Labor has given final approval to its long-anticipated “fiduciary standard” regulation. The new rule – which has been in the works for nearly six years – requires financial advisors who provide investment recommendations for retirement accounts to meet a fiduciary standard by putting clients’ interests before their own. Previously, a registered representative advising a retirement client was required only to provide recommendations that would be “suitable;” a “suitable” investment for a client nevertheless may not be the best choice for that client. The new rule will require that such advisers must now act in the clientsbest interest when giving retirement investment advice.The rule covers all financial professionals who offer investment advice for retirement accounts, such as IRAs and 401(k)s. The rule provides clarification as to what does and does not constitute fiduciary “advice,” and clarifies that the exemption for “education” does not constitute advice such that it would trigger a fiduciary duty.

The proposed rule has been the subject of many comments, and has encountered resistance from many in the industry. The DOL did soften some provisions from the initial proposal, but the final rule may yet face further challenges from the Chamber of Commerce and others in the industry. The new rule will be phased in over time; the new and broader definition of “fiduciary” will take effect in April 2017, with firms expected to be in full compliance by Jan. 1, 2018.