Despite some chatter about possible political or legal challenges to the DOL’s final fiduciary rule, the huge impacts on the industry are here to stay, according to several experts speaking at the Fi360 Insights conference in San Diego Thursday.
“This is an historic rule. What happened yesterday [with the release of the final rule] is a generational change,” said Duane Thompson, senior policy analyst at fi360, a consulting and training firm.
“It is the biggest change I’ve seen since ERISA in 1974,” agreed Fred Reish, a partner at Drinker Biddle and Reath.
“We’re all fiduciaries now,” Reish added, speaking of advisors generally.
While the DOL did backtrack on some provisions, “I think people are by and large underestimating the power of a fiduciary responsibility [and] how that’s going to change behavior,” Reish said. “Think of someone who’s spent their whole life at a transactional firm, and all of the sudden, they’re going to be a fee-for-service advisor. That’s a pretty big step.”
Benefits to investors will come after the DOL rule becomes effective next year in April, as advisors “embrace fiduciary status … conceptually and philosophically,” Reish added.
Although opponents of the rule are making noises about stopping implementation, Reish and Thompson said that’s not likely to happen.
Financial institutions will be well along in changing systems and training by next January should a new (and unfriendly) Republican administration take over.
“By the time they get to January 20, they’re going to be so deeply into this that I don’t see anything turning off and on,” Reish said.
“The likelihood of anything done legislatively to overturn the rule has maybe a 1 in 50 chance,” Thompson added. “Even if a bill got to the president’s desk, you know with his political capital he’s going to veto it. … The House and Senate are not going to be able to muster a two-thirds vote to overturn it.”
The changes the DOL made to simplify compliance could dissuade industry opponents from mounting a legal challenge, Reish said.
“Major trade associations hired attorneys to prepare lawsuits before the rule came out, but the rule became much easier to comply with than the [earlier] proposal, so they’re going to have to rethink that,” he said. “We’ll know in a week or so if there’s going to be a lawsuit. They are making those decisions right now.”