Unless you’re a benefits or retirement manager, you probably have not paid much attention to the Department of Labor’s Fiduciary Rule announced last April. One of the rule’s goals was to put an end to the billions of dollars a year that investors are estimated to waste paying exorbitant fees. According to InvestmentNews.com, “The idea is that the regulation will stop advisers from putting their own interests in earning high commissions and fees over clients’ interests in obtaining the best investments at the lowest prices.”
In short, the DOL’s definition of a fiduciary requires that financial advisors, salespersons, planners, agents and brokers act in the best interests of their clients, put their clients’ interests above their own and clearly disclose all fees and commissions in dollar form. The rule creates a much greater level of accountability than salespersons and others have seen in the past and would have had a significant impact on those who rely on commission based sales. Retirement planning for defined contribution plans (401(k), 403(b), employee stock ownership), defined benefits plans (pension plans) and IRA’s could have seen significant changes.
On February 3, 2017, President Trump signed an Executive Order delaying the rule’s implementation by 180 days (6 months). This order includes instructions for the DOL to carry out an “economic and legal analysis” on the rule’s potential impact. The memo also stated that if the DOL concludes that the regulation hurts investors or firms, it can propose a rule “rescinding or revising” the regulation. Acting U.S. Secretary of Labor Ed Hugler issued a statement following the release of President Trump’s memorandum on the Department of Labor’s Fiduciary Rule that said only “The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”
For now, this means that retirement investments and planning will continue as is. Although the battle to implement the rule took six years, it will come as no surprise if it is rescinded in less than six months’ time. A potential win for the financial services industry, a potential loss for retirement investors.