Today, the Department of Labor (DOL) issued a final rule delaying the applicability of the full protections of the conflict of interest fiduciary rule by a full year and a half, from January 1, 2018 to July 1, 2019.

The investment advisory and financial planning industries, as well as consumer watchdog groups, say the delay in best interest sales requirements and the enforcement of the rule, leave investors preparing for retirement without important protections from brokerage sales misconduct. In contrast, the brokerage, securities and insurance industries, which have been fighting the DOL’s fiduciary rule in District Court, hailed the delay as a victory for avoiding consumer and industry confusion.

The Financial Planning Coalition said delaying the fiduciary rules enforcement provisions “unnecessarily derails essential and long overdue reform and jeopardizes the financial well-being of millions of American savers, who lose billions of dollars each year because of conflicts of interest.”

The Coalition, which includes the Certified Financial Planner Board of Standards, Inc. (CFP Board), the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA), “strongly urges the Department to continue its work toward full implementation of investment-advice standards that can support businesses and consumers as soon as possible,” the group said in a statement after the DOL’s delay today. 

“The Coalition believes that requiring advisors to work in retirement investors’ best interest is an essential and long overdue reform,” the group said. Delaying enforcement of the fiduciary rule is unnecessary because the DOL has already addressed concerns raised by lawmakers, regulators, financial industry organizations, public interest groups and consumers,” the Coalition added.

Consumers groups say the delay effectively guts protections against sales abuses that the DOL rule was designed to provide to retirement investors. “The Trump Administration’s actions prove that it is far less interested in protecting investors from the harmful effects of conflicts of interest than it is in catering to Wall Street interests,” the broad-based Save Our Retirement (SOR) Coalition said in a statement following the DOL’s delay earlier today.

“This action is effectively a repeal of the fiduciary rule’s most critical provisions -- the provisions that ensure the rule is effective and enforceable and that financial advisors and their firms are accountable for providing the best interest advice retirement savers both want and need,” said the SOR Coalition, whose steering members include the AFL-CIO, Consumer Federation of America and Pension Rights Center.

“This rule is only as strong as its ability to be enforced. By stripping out the rule’s private enforcement mechanism, and by stating that the Department won’t enforce the rule, the DOL has rendered the rule toothless. This is exactly what the industry rule opponents wanted -- a best-interest-in-name-only standard that leaves the broker-dealer, insurance, and mutual fund industry free to continue draining retirement savers’ hard-earned money with impunity.  This outcome is especially troubling, since many firms in the advisor industry have embraced the rule and were fully prepared to comply by January 1st,” the SOR Coalition stated.

SOR also argued today that the delay is actually a strategic tactic designed to dismantle the rule. “DOL claims it is simply delaying the full implementation and enforcement of the fiduciary rule by 18 months, but delay implies these provisions will become applicable in the near future. However, the Trump Administration has made clear its goal is that these most critical provisions never become applicable. Instead, the Administration’s intent is to use this time to permanently dismantle key elements of the rule,” SOR said.

The securities and brokerage industries who are battling the DOL rule in District Court, lauded the delay today as a victory.

“We applaud the DOL’s decision to delay the remaining portions of its fiduciary rule for 18 months,” said Dale Brown, president and CEO of the Financial Services Institute. “This delay will allow the DOL to conduct a thorough review of the rule, as ordered by President Trump, to ensure investor choice and access to retirement savings advice is protected. In addition to the rule review, we are encouraged by the DOL’s statement that they will coordinate with other regulators, including the SEC, to simplify and streamline the rule.”

Specifically, the DOL has delayed the applicability date of the Fiduciary Rule’s three exemptions for brokers who work with investor’s retirement assets, including: the best interest contract exemption and the class exemption for principal transactions.

SIFMA, which partnered with the FSI and other groups to block the DOL rule in District Court, also hailed the delay.

“While the Department of Labor works to address significant concerns with the rule, the delay will help provide certainty to investors and avoid confusion and cost associated with continued piecemeal delays,” SIFMA President and CEO Kenneth E. Bentsen Jr., said.

“SIFMA’s member firms have long advocated for the creation of a best interest standard, but one that more broadly protects clients and better protects client choice.  The SEC should take the lead in coordination with the DOL to develop such a principles-based standard of conduct for the benefit of investors,” Bentsen continued. 

SIFMA has argued vehemently against pushing forward with the DOL fiduciary rule exemptions, citing among other things the technology, educational and compliance costs firms would sustain for what they say is a temporary rule that will “certainly undergo significant changes” in the future.

The American Council of Life Insurance sent out a statement saying it “lauds” the DOL’s decision to delay provisions of the fiduciary regulation.

“The evidence before the department is clear,” said ACLI President and CEO Dirk Kempthorne. “The fiduciary regulation has harmed small and moderate retirement savers by restricting or eliminating access to retirement products and services, creating an advice gap for those most in need of help. Its bias against commission-based arrangements restricts consumer access to annuities – the only product in the marketplace providing guaranteed lifetime income.

“Full implementation of the regulation must be delayed to allow the department, state insurance regulators, the SEC, Finra and Congress to work in concert on reasonable and appropriately tailored rules that require all sale professionals to act in the best interest of their customers. A collaborative and harmonized approach would ensure all consumers receive retirement savings information and related financial guidance from financial professionals acting in their best interest, regardless of the retirement products they purchase,” Kempthorne said.

”We agree with the department’s desire to promote coordination among regulatory stakeholders,” Kempthorne added.

“The delay will provide sufficient time for the department to complete its examination of the regulation and determine next steps.”