Finance News & Insights

What does Trump’s latest move really mean for the Fiduciary Rule?

In the latest of a seemingly endless string of confusing announcements about changes to federal regs, President Trump has instructed the DOL to take a closer look at the new fiduciary rule. To many, that means a delay of the controversial rule is all but guaranteed.  

But Trump’s announcement regarding the fiduciary rule caused plenty of confusion.

A big reason for the confusion: Two Memorandums were issued on the very same day — a draft and a final version — and the two announcements contained significantly different information.

In the draft Memorandum on the rule Trump himself called but for an 180-day delay of the rule’s implementation deadline, which is slated to start on April 10, 2017, and continues to be phased in until January 1, 2018.

However, in the final version of the Memorandum, there was no specific mention of the 180-day delay.

Instead, the announcement simply instructed the feds to conduct the analysis to determine if the new rule has:

“harmed or is likely to harm investors due to a reduction of Americans’ access to certain retirement savings offerings, retirement product structure, retirement savings information, or related financial advice.”

If that analysis does in fact uncover harm to retirement offerings and advice, the order gives the DOL the option of “rescinding or revising” the version of the rule the financial services industry and employers have been prepping for.

Regardless of whether the fiduciary rule will survive the analysis or be altered greatly as a result, many believe the analysis itself virtually ensures the April 10 deadline gets pushed back.

For example, Erin Sweeney, an employment attorney with Miller & Chevalier, expects the DOL to react to Trump’s announcement by issuing an official delay on its end. As reported on Think Advisor, Sweeney said:

“We’re expecting to see a very short, simple notice in the Federal Register that will delay the rule most likely by 180 days.”

Following an official notice on the fiduciary rule’s delay, Sweeney expects the agency to issue a stay of litigation related to the rule. As we’ve covered previously, there are several current lawsuits against the legality of the fiduciary rule.

A refresher on the rule

As Finance pros know, the fiduciary rule aims to grant plan participants greater protections by requiring brokers and advisers to act in their clients’ best interests when doling out investment advice.

For your employees, this is a good thing as there will be greater incentive for advisers and brokers to offer the best possible investment options for plan participants — instead of directing participants to investments they’re getting paid to recommend.

Reason: Under the final rule, anyone providing investment advice – including brokers and advisers – will be designated as a fiduciary and must disclose any potential conflicts of interest to plan participants.

Should advisers/brokers opt not to disclose such conflicts, they could be subject to ERISA non-compliance penalties as well as employee lawsuits. But brokers and advisers aren’t the only ones who are open to penalties and legal action. The employers that hired the advisers in the first place can also be liable under the law.

The rule will also force Finance to take and active role and stay on top of what their advisers and brokers are doing for their employees and do their due diligence in the selection process.

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