Highly critical of the DOL fiduciary rule, Don Trone, the father of the fiduciary movement in the retirement industry, expects the rule to be delayed. Rather than furthering the fiduciary standard to help improve investment decisions, Trone predicts that the rule will accelerate class action lawsuits especially against advisors hurting participants holding retirement accounts.
In the interest of maximizing the number of advisors that will be considered fiduciaries, the DOL minimized the standard itself. Though many broker dealers and other firms are setting up best practices and standards under the DOL rule as if it were going into effect April 10, 2017, Trone warns that these practices will not prepare the firms and their advisors for the onslaught of class action lawsuits which he claims is the real intent of the DOL rule ultimately harming participants.
Rather than receiving sound investment decisions, smaller IRA accounts will get what Trone calls “Stepford portfolios” that are not helpful to the investors and will ultimately be more expensive.
At the route of the problem with the new fiduciary rule, according to Trone, is the DOL’s lack of expertise in fiduciary best practices for investment management services. Though the DOL heard testimony from many experts and received numerous comments, the result was as if the DOL worked in isolation.
To make his point, Trone asks when was the last time the DOL came into the office of a plan advisor or sat with a plan sponsors investment committee to learn the work of retirement investing? While there’s confusion about whether the DOL rule will go into effect April 10, 2017, many firms have or are planning to make changes to comply with the rule. The move to a fee based fiduciary world with lower costs and fewer commissioned products which has started with corporate retirement plans like 401ks is bound to bubble over into IRAs regardless of the DOL’s new rule. Which may pave the way for robo-advice for smaller accounts and, according to Trone, more lawsuits.
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