A common stereotype often pointed to is that those of us who work in the financial services industry have been fighting the Department of Labor’s long-awaited and much discussed fiduciary rule tooth and nail since its outset. On Friday, President Trump signed an executive order halting the enforcement of this rule.
As an adviser who has acted in a fiduciary capacity for upwards of 10 years, I can say with confidence that the bulk of advisers who work with retirement plan investors embrace the fiduciary rule — that was originally set to take effect April 10 — and believe that to best serve clients, we must act in their best interest. With that said, this stoppage does not necessarily mean the fiduciary rule will cease to exist. Advisory firms, broker-dealers and other financial professionals have been in the process of updating their procedures and services to guarantee compliance with the fiduciary rule.
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Earlier in the day Friday, the Trump administration came out indicating they were going to delay enforcement of the DOL’s final fiduciary conflict of interest rule to ensure the framework of the rule will align with meeting the needs of the marketplace. In particular, a few things the administration wants to consider is whether the anticipated intention of the rule will harm investors due to a reduction in access to certain retirement savings vehicles, whether it will result in dislocation or disruptions within the industry that will adversely affect investors and retirees, and whether it will spur upticks in litigation or the prices that investors or retirees will need to pay in order to gain access to retirement services, among other things.
At our firm, we are full proponents of the fiduciary rule in concept and in our everyday work currently acting in a fiduciary capacity. We think the spirit of objective, conflict-free fiduciary advice is absolutely the bedrock of the services we provide and that an adviser should provide this to companies and their employees, regardless of this rule being halted or not. We do recognize that the creation of this rule may have some unintended consequences and most financial institutions that have been working to comply with this rule will be relieved there is extra time to implement these changes.
The current administration is delaying this rule to have their own review brought forward. One of the campaign promises President Trump ran on was considering current regulations and ensuring the environment we have in this country does not inhibit productivity, opportunity for growth, and technology and innovation.
I think the concept that working Americans should receive objective and conflict-free advice is one that is important and my belief is that this delay will allow the administration to look at creating a rule that may align more with the SEC. Ultimately, whether it is this fiduciary rule, or another version, or just simply competition in the marketplace, fiduciary advice will be the industry standard when it comes to how advisers are serving investors and companies in the future.
The delay of the fiduciary rule will, for us, have no impact since we already act as fiduciary advisers. Going forward, for advisers, and for RIA firms and broker-dealers in particular, while the rule may be delayed, I do not think you can leave behind the importance the fiduciary standard holds, even if the administration drastically changes or completely does away with this ruling. You can’t “put the toothpaste back in the tube.”
The business model and service models of the future encompass fee-based fiduciary advisers for retirement plans. Generally, it is the model that is in the best interest of working Americans and it is the one that can now be achieved and delivered for the broad marketplace whether a plan is $1 billion or sub-$1 million. While the delay in this rule may help the industry have more time to get new procedures in place, ultimately the open market and competition will require advisers serving retirement plans to act as fiduciaries, whether it is by law or not.
Alexander G. Assaley, III AIF® | AFS 410(k) Retirement Services| 7700 Old Georgetown Rd. Suite 630 Bethesda, MD 20814 | (301) 961-8416
Securities and Advisory services offered by Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. The material provided is for general information purposes only and does not constitute either tax or legal advice.
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