Fee-Only Advisors Could Win from DOL Rule Repeal
A repeal of the Department of Labor’s fiduciary rule, which requires retirement brokers to put clients’ interests first, will be a boon for fee-only advisors already acting as fiduciaries, Advisor Perspectives writes.
While President-elect Donald Trump hasn’t taken a stance on the issue, his presidential campaign advisor Anthony Scaramucci has called for its repeal, infamously comparing it to the U.S. Supreme Court’s Dredd Scott Decision, which ruled that African-Americans weren’t U.S. citizens.
Scaramucci is now on Trump’s transition team, so a rollback of the rule in some form is inevitable, Advisor Perspectives claims.
And that’s great for fiduciaries, according to the publication. For starters, it means less paperwork documenting relative fees and differences in services and investments between their clients’ 401(k) plans and individual retirement accounts advisors suggest for rollovers, Advisor Perspectives writes. That means more time with clients, according to the publication. In addition, the rule would have eliminated the competitive advantage fiduciary advisors hold over their counterparts who operate only under the suitability standard, Advisor Perspectives writes.
If all retirement brokers were held to the fiduciary standard, brokers who adopt level-fee models would look similar to fee-only advisors, according to the publication. What’s more, fee-only advisors will also benefit from the added attention given to the fiduciary standard that would coincide with the repeal, Advisor Perspectives writes.
But Labor Secretary Thomas Perez, in his exit memo, is urging the incoming Trump administration to go through with the rule, calling it a “a historic step to protect the savings of America’s workers,” the National Law Journal writes.
Perez also calls for adequate funding of the DOL’s enforcement arm, according to the publication. Barbara Roper, director of investor protection for the Consumer Federation of America, says that lack of enforcement is a way to water down the rule but is less damaging in the long run than a repeal, the National Law Journal writes.
The fate of the fiduciary rule remains unclear, however.
A conservative Republican caucus is urging Trump to repeal the rule, and it still faces several legal challenges from various industry groups. But the DOL has scored three victories in the courts already. What’s more, many industry experts say Trump can’t spend the political capital necessary to kill the rule. On the other hand, Trump’s pick to take over from Perez to lead the DOL, Andy Puzder, has a track record of opposing President Barack Obama-era regulations. Yet even Puzder is yet to take a stance on the fiduciary rule, and as a lawyer has defended a pension fund against investment companies over excessive fees.