Trump Requires DOL to Reevaluate the Fiduciary Rule
Under current law, stockbrokers are only required to recommend suitable investments to their clients. The Department of Labor has issued a so called “fiduciary rule” which requires brokers, advisors and insurance agents, when providing investment advice for retirement accounts, to act at a higher fiduciary standard. The DOL rule has not yet taken effect.
President Trump has issued the Secretary of Labor a “Presidential Memorandum on Fiduciary Duty Rule.” The Presidential Memorandum notes that one of the priorities of the Trump Administration is to empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses, such as buying a home and paying for college, and to withstand unexpected financial emergencies.
The Presidential Memorandum directs the Secretary of Labor to examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice. As part of this examination, the Secretary shall prepare an updated economic and legal analysis concerning the likely impact of the Fiduciary Duty Rule, which shall consider, among other things, the following:
- Whether the anticipated applicability of the Fiduciary Duty Rule has harmed or is likely to harm investors due to a reduction of Americans’ access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;
- Whether the anticipated applicability of the Fiduciary Duty Rule has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; and
- Whether the Fiduciary Duty Rule is likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.
The Presidential Memorandum further directs the Secretary that if the Secretary makes an affirmative determination as to any of the considerations identified above or if the Secretary concludes for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with the priority identified above then the Secretary shall publish for notice and comment a proposed rule rescinding or revising the Rule, as appropriate and as consistent with law.
Remarks made by President Trump upon signing the Presidential Memorandum can be found here.
The DOL issued a short statement which said “The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”
House Financial Services Committee Chairman Jeb Hensarling (R-TX) issued a press release which said “No unaccountable Washington bureaucrats should get in the way of hardworking Americans and their ability to make financial decisions that work best for their families. Republicans want to empower Americans to make their own financial decisions, but the Obama administration’s so-called fiduciary rule instead empowered unelected, unaccountable bureaucrats. That means costs will go up and choices will go down – just like with Obamacare. Republicans believe if you like your retirement planner, you should be able to keep your retirement planner. If you like your financial adviser, you should be able to keep your financial adviser.”
Congresswoman Maxine Waters (D-CA), Ranking Member of the House Committee on Financial Services shot back, saying “Trump’s first action, a memorandum to the Department of Labor, seeks to delay crucial rules that require that financial advice be in customer’s best interest. Why doesn’t the President explain to the people of Ohio, Pennsylvania, Michigan, and Wisconsin how delaying and repealing rules that protect seniors’ hard-earned savings from unscrupulous financial advisers is a good thing? In the past our nation’s workers and retirees have been swindled out of $17 billion in retirement savings each year because of conflicted financial advice from advisers seeking to fatten their own bottom line through excessive fees, high commissions, and kickback schemes. So, the Department of Labor stepped in and, after six years of careful consideration, finalized rules last year to require advisers to put the interests of their clients ahead of their own. Trump’s actions today delay those rules so that his cronies in the Administration and on Wall Street can ultimately repeal them. A repeal of these common sense rules will only benefit powerful lobbyists representing insurance companies, big business, brokers and banks, not the millions of working families across the country who would be left vulnerable to their predatory practices.”
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