What is the cost of DOL Rule?
As expected, President Trump continues to make waves during the first 100 days of the new administration. Institutional investment managers and professional fiduciaries are scrambling to react, comply and anticipate the impact of what may, or may not, become the next, New Department of Labor (DOL) Fiduciary Rule. If that sounds like a lot of uncertainty, it is.
On April 6 of 2016, Secretary of Labor Thomas Perez was quoted in the New York Times as saying that putting the customers first “is no longer a marketing slogan. It’s the law.” In that article the New Fiduciary Rule was packaged and reported as being “a Law.” That strong language and such references are now proving to be a bit premature as the Trump Administration, the Department of Labor the Securities and Exchange Commission and the financial services industry are jockeying for position along-the-fiduciary-rail; however it is questionable if the race to operate in the client’s best interest is in the first-quarter or the home-stretch.
Who is Touted to Win?
It is too early to know how this plays out; however, as sad as it may seem, the clear loser in the short-run is the very individual that the rule was intended to help – the retirement plan participant.
The original DOL new fiduciary rule was scheduled to be phased-in starting on April 10, 2017 but that seems unlikely at this writing.
The Anticipated Spend by Retirement Plan Service Providers
Even before the Trump Administration injected uncertainty into the new DOL Rule during the First 100 Days, there were estimates of what implementing the new rule would cost retirement plan providers. Estimates by Principal Financial were 1 million dollars per month for the first 18 to 24 months – then 5 to 10 million dollars per year.
That is only one service provider, and there are hundreds of service providers. Assuming only one hundred service providers the industry is facing a cost of over 100 million dollars a month to comply. Add to that, Lawsuits such as the recent Northern Texas Court Case.
It is easy to see that ordinary citizens and retirement plan participants are paying a high price for a new fiduciary rule which is designed to protect the very same people.
