With the election of Donald Trump as the 45th U.S. President, some experts are predicting that the DOL rule could be in jeopardy in early reactions . Last month, a key Wall Street adviser to Trump boldly announced that the rule would be repealed if Trump were elected. Most pollsters had predicted a Clinton victory leaving the retirement and financial services industry flat footed and perhaps uncertain today about what to do next.
Though there is little detail on specific policies by the Trump campaign about many issues including the DOL rule, noted Barbara Roper of the Consumer Federation of America, the rule could be in jeopardy based on rhetoric from Trump about rolling back on regulations in general.
In October, Anthony Scaramucci of Skybridge Capital and recently named adviser to Trump on small business affairs, boldly claimed that the DOL rule would be repealed if Trump was elected calling it a clear case of Federal overreach. Any chance that the SEC would promulgate fiduciary rules under Dodd-Frank seems unlikely now.
Early market reactions to the Trump election were negative.
Meanwhile, broker dealers that has spent tens of millions to comply with the rule may need to rethink their efforts determining whether the rule will be revoked or significantly revised. Merrill Lynch recently banned commissioned products in IRAs.
In reality, the DOL rule will have a far more profound effect on IRAs as well as the annuity industry which recently lost their efforts in court to have the rule revoked. Defined contribution (DC) plans have been moving towards a more conflict free model with more plan advisors acting as fiduciaries eliminating the use of commissions and more plans are not employing revenue sharing or at least leveling participant payments.
While conservative politicians had been opposed to the DOL rule, some more liberal lawmakers were also concerned whether the rule would limit access by less affluent investors to advisors who may be reluctant to act as a fiduciary on smaller accounts. And while fee based arrangements by fiduciary advisors may be good for some investors, commissioned accounts that do very little trading may actually be more efficient.
Most advisors have been waiting to hear from their licensing organization to determine what they should communicate to clients and plan sponsors have been waiting to hear from their plan advisor and providers. No doubt the industry will reassess what to do now that the DOL is in jeopardy but many will need to proceed as if the rule will go into effect April 10, 2017 – just in case.
