Virtually everyone I speak with in this business assumes the DOL rule is a fait accompli.
Sources better placed than me in the Beltway say even Washington, D.C., attorneys suing the DOL on behalf of brokerage and insurance clients believe the possibility of the rule being overturned is remote. Instead, their goal is to water down what they view as the rule’s most onerous aspects.
How much of their conviction is based upon a growing consensus that Hillary Clinton will be elected president on November 8 is unclear. I don’t know if either Clinton or Donald Trump knows what the DOL rule is.
But one might think that if Trump is elected, he might look for at least a few areas to compromise with congressional Republicans who vehemently oppose the rule and with whom he clashed almost daily in October. As someone who spent June 23 in England as it voted on Brexit, I’ve learned to expect the unexpected.
Conventional wisdom, for what it’s worth, thinks otherwise. Giant wirehouses have had executive teams working on DOL day for years and seem prepared to implement the rule. On the flip side, low-cost providers like Vanguard look prepared to expand into markets that were always tangential to them, like annuities.
The next regulator advisors need to watch on the fiduciary front is the SEC. As the leading regulator of the securities industry charged with protecting the public, the SEC has been upstaged and embarrassed by the DOL. Regulators do not like to be embarrassed.
The SEC has indicated it plans to provide broader fiduciary guidance in the future that will extend beyond retirement accounts. But if an advisor works with a client on IRA and 401(k) assets, the DOL rule as initially written essentially holds them to a fiduciary standard on taxable accounts as well.
Last spring, the SEC indicated it would provide broad fiduciary guidance sometime in the spring of 2017 after watching how implementation of the DOL rule plays out. SEC officials indicated they’d like to standardize and synchronize regulations to avoid confusion. We’ll see what happens.
Evan Simonoff
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