Editor-in-Chief, 401kTV
Though expected, but maybe not so soon, the President called on the DOL to conduct an economic and legal analysis of the DOL’s fiduciary rule, asking for a memo of intent if the rule needs to be modified or rescinded if found to adversely affect peoples’ ability to save for retirement. The DOL responded that it will consider its options – the rule is final with the April 10, 2017date of implementation looming.
Specifically, the President asked the DOL to determine if the rule adversely affects people’s access to retirement advice, increases costs through industry disruption or increases the potential for litigation. The surprise was how quickly the Trump administration focused on the DOL rule also announcing its intent to scale back provisions of the Dodd-Frank bill and redirect the CFPB (Consumer Finance Protection Bureau) created by Senator Elizabeth Warren after the latest financial crisis to protect consumers.
According to a spokesperson at the Financial Services Roundtable, the President’s action was a clear indication that they intend to do whatever it takes to “scuttle” the rule or make significant changes.
The short-term implications for DC (defined contribution) plan sponsors is muted as the rule did little to change their fiduciary status or duties other than to possibly pay closer attention to whether their advisor was acting as a fiduciary – something they should have been doing anyway. The intent of the rule is and will continue to be implemented with more and more advisors able and willing to act as co-fiduciaries. In addition, most broker dealers not comfortable waiting or hoping that the rule would be delayed have already implemented changes required by the rule.
The greatest impact will be in IRA rollovers as well as insurance products sold to retirees.
Even if the rule is eventually rescinded, the move to advice that is not conflicted through fee based fiduciary advisors will continue. That ground swell was not created by the DOL rule just as greater fee disclosure and transparency was not started with 408b2 in 2012 – the rules just accelerated the movement. It will be hard , evenimpossible for broker dealers to roll back changes already implanted or in the works and for record keepers which have spent hundreds of millions of dollars to comply with the rule.
