I have some good news and some bad news.
The good news is that the Department of Labor’s fiduciary rule, which states that any broker or manager offering advice on retirement-savings accounts must put the clients’ interests first, looks like it will survive. It goes into effect officially on June 9.
The bad news? There is no evidence that Secretary of Labor Alexander Acosta either understands the reasons for the rule, or believes it is important. He makes that much clear in an op-ed in the Wall Street Journal:
Another example of a controversial regulation is the Fiduciary Rule. Although courts have upheld this rule as consistent with Congress’s delegated authority, the Fiduciary Rule as written may not align with President Trump’s deregulatory goals. This administration presumes that Americans can be trusted to decide for themselves what is best for them.
Certainly, it is important to ensure that savers and retirees receive prudent investment advice, but doing so in a way that limits choice and benefits lawyers is not what this administration envisions.
Today, I would like to suggest that instead of killing the rule, Acosta should improve it.
Why? Ultimately, the fiduciary rule will save investors -- and by extension, the federal government -- hundreds of billions of dollars in the future. This also explains who opposes the rule -- specifically, those who stand to benefit most if it’s abandoned. It was noteworthy that shares of large publicly traded brokers dropped when Acosta’s op-ed was published, suggesting that dollars, not principles, were the real issue.
The arguments against the fiduciary rule are thin, particularly the claim that it limits choices. There is a universe of options available, from brokers to registered investment advisers. Charles Schwab Corp. offers retirement advice. So does Vanguard Group Inc. There are lots of automated algorithmic software services that do the same. And then there are all the large brokerage firms.1 And for those who choose to keep their own counsel, there is nothing in the new rules to stop that. Even after the fiduciary rule is implemented, there will be an enormous range of options available for investors in tax-deferred retirement accounts.
But something else Acosta said deserves scrutiny: “This administration presumes that Americans can be trusted to decide for themselves what is best for them.”
Since this seems to be the sturdiest objection that Acosta has.