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Time Running Out to Kill DOL Fiduciary Rule?

December 23, 2016

The chances for a repeal of the Department of Labor’s fiduciary rule are growing slimmer, financial industry experts tell BenefitsPro.

Opponents of the rule, which requires retirement brokers to put clients’ interests first, could hope for a delay of the April 10 implementation date, according to the publication. A delay would be within the statutory ability of President-elect Donald Trump's administration, Cary Coglianese, director of the University of Pennsylvania Law School’s Program on Regulation, tells BenefitsPro.

But opponents of the rule shouldn’t hold out hope that Trump’s administration is going to kill the rule outright, according to the publication.

If Trump wanted to undo the rule — and so far he hasn’t taken a stance on the issue — his administration would “have to signal that soon,” Jean-David Larson, director of regulatory and strategic initiatives at Russell Investments, tells BenefitsPro.

Meanwhile, the GOP-controlled Congress isn’t likely to defund the rule through appropriations, he says. That would require too much political capital and take away from issues that Trump and the Republicans have promised to focus on, Larson tells the publication.

On the other hand, the new administration could effect some changes by January 1, 2018, the second implementation date, by which point advice firms must comply with the best interest contract exemption provision of the rule, according to Larson. That exemption lets retirement brokers take commissions on some products after signing a best interest contract with the client. Larson tells BenefitsPro that the rule could be softened by then, and restrictions on class-action waivers could be lifted, he says.

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In any case, large advice firms are already taking steps to comply with the rule, according to Larson. And Melissa Dimitri, a senior manager in Grant Thornton’s Advisory Services, tells BenefitsPro that some of their clients are already working to “adopt the spirit of the regulation.”

The rule faces vocal opposition on several fronts, including an influential conservative Republican caucus calling on Trump to repeal it.

There are also several outstanding legal challenges to the rule, but the DOL scored a third victory in the courts earlier this month.

And even Trump’s pick to head the agency, while generally opposed to President Barack Obama-era financial regulation, is so far staying mum on the fiduciary rule.

By Alex Padalka
  • To read the BenefitsPro article cited in this story, click here.