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Morningstar Thinks Fiduciary Rule Repeal is Unlikely

By Alex Padalka April 10, 2017

The delay of the Department of Labor’s fiduciary rule will be helpful for the financial industry, but an outright repeal isn’t likely and advice firms may want to start voluntarily complying with aspects of the rule, Morningstar advises in a commentary note from Aron Szapiro, director of policy research.

The applicability date of the rule, which requires retirement brokers to put clients’ interests first, has been pushed back from April 10 to June 9.

Technically, that means that as of June 9, retirement advisors “will be expected” to comply by charging reasonable commissions and steering clear of “misleading statements,” Morningstar writes. But the DOL always envisioned a transition period for firms to get in compliance with the best interest contract exemption, which allows brokers to sell some commission-based products after signing a best interest contract with the client, according to Morningstar. And that transition will be easier as several requirements on disclosure, record-keeping and monitoring have been delayed until January 1, 2018, Morningstar writes.

The delay may also be “helpful” as far as how advisors get paid, allowing product providers to roll out more products, such as T-share mutual funds, that allow commission-based brokers to comply with the rule, according to Morningstar.


Meanwhile, however, wealth management practices may want to set up some record-keeping and monitoring functions voluntarily, because an outright repeal of the rule isn’t likely — and the industry is heading toward a “client-centric” approach anyway, according to Morningstar. “The momentum toward offering holistic advice is inescapable,” it adds.