After the U.S. Department of Labor announced a formal attempt to delay its fiduciary rule, supporters and opponents of the rule reacted with skepticism, relief and confusion.
The DOL on Wednesday released statements indicating it was seeking issuance of a new rule that would delay enforcement of the fiduciary rule 60 days beyond its April 10 applicability date, a process expected to take at least 16 days.
“The DOL’s proposed fiduciary rule delay marks a new period of limbo,” said Mike Walters, CEO of Ada, Mich.-based USA Financial in emailed comments.
Walters said he expects the Trump administration will streamline the rule and enhance its economic benefits. The administration could also defer to the SEC for a "more all-encompassing plan" that could benefit investors and financial professionals, he added.
“It is difficult to imagine that the idea of 'best interest' will be vacated entirely now that it has been in the spotlight," Walters said.
The fiduciary rule establishes stricter "best-interest" standards for advisors' investment recommendations given for retirement accounts. Proponents of the rule argue that the standard should be applied to advisors of all retirement advice-seekers, while opponents argue the more stringent regulations will make it more difficult for Americans to access financial planning services.
Though the rule technically became effective last summer, most of its provisions were set to become applicable to advice-providers in April, with full applicability slated for 2018.
After news of the DOL decision to seek a delay broke, many advisors and industry watchdogs were unsure what it meant for the rule, which went into effect after years of comment and review.
“We don’t feel that anyone truly knows the outcome of the DOL rule and its subsequent impact on the industry,” said Anthony Stich, director of global marketing at Advicent, a fintech firm with a focus on compliance. “If firms are paying close enough attention, they will quickly take notice that the executive branch and the judiciary branch are both on different tracks with regard to the rule.”
The DOL, in deciding to seek a delay, referred to a Feb. 3 memorandum from President Donald Trump calling for a review of the fiduciary rule’s economic impact. After the proposal to delay the rule is reviewed, the DOL will enter a 45-day comment period regarding the president’s memorandum.
Skip Schweiss, TD Ameritrade managing director for retirement plan services and advisor advocacy, told Financial Advisor on Wednesday that the DOL might not be successful in its attempt to delay the April 10 implementation date.
Like Schweiss, David Tittsworth, counsel in the investment management practice of Boston-based Ropes & Gray, argued that even if the DOL is able to delay the rule for 60 days, it is unlikely to be able to conduct its review within that time.