Retirement savings rule will not be delayed further

Posted May 24, 2017

Writing in the WSJ, Labor Secretary Alexander Acosta says there will be no further delays to implementation of the previous administration's fiduciary rule. It also expands the types of advisers who are mandated by a "fiduciary" standard to act in their clients' best interests, not their own.

Acosta published an op-ed in the Wall Street Journal late Monday announcing that his agency has found "no principled legal basis" to further delay an initial implementation date for the rule.

The rule, which was finalized in April 2016 after years of back and forth between federal regulators and the banking industry, aimed to prevent advisors from gouging customers by selling them products that could benefit the advisor financially but may not be in the best interest of the individual.

The Trump administration is allowing to go forward an Obama-era rule that puts stricter requirements on professionals who advise retirement savers on their investments. Jaret Seiberg, an analyst with brokerage and investment bank Cowen & Co., said in a research note that he expects a delay in implementing that part of the rule of as long as a year and believes the Labor Department ultimately will propose eliminating the ability of customers to file class-action suits.

The move was "a great victory for Americans saving for retirement", said Dennis Kelleher, the president of Better Markets, a group that advocates for stricter regulation. "We will do so while respecting the principles and institutions that make America strong".

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However, the full Congress has failed as yet to pass any measures impacting the fiduciary rule implementation, and the new administration took four full months to fill the position of Labor Secretary. The department said it would use the time to collect applicable information, including public comments, on the potential consequences of the rule.

Trump ordered a review of the rule on February 3, with White House Press Secretary Sean Spicer calling it "regulatory overreach" by the Labor Department. The rule is meant to discourage brokers and other financial professionals from putting retirement-plan assets into products that pay high commissions or profit-sharing compensation to the brokers-a practice that's now legal as long as the investments can be portrayed as "suitable" for the customer.

(More: Will the fiduciary rule shrink the ever-expanding world of share classes?)"I think it is kind of an endorsement, if I read between the lines", Charles Field, co-chair of the financial services practice at Sanford Heisler Kimpel, said of the DOL's discussion on clean shares.

Most retirement plan providers have already invested a great deal of money into improving plan communication and education, making every effort to comply with the fiduciary rule's mandate. It would not be replaced until the Securities and Exchange Commission came up with a separate rule for all investments, not just retirement assets, prescribing standards for brokers and advisers - and it would have to be close to the SEC's rule.