The ATEL Monthly

Discussions on the DoL Fiduciary become Heated as the New Administration Prepares to Take Office

The fate of the new DoL Feduciary rule is still up in the air. The U.S. Department of Labor's new fiduciary rule is set to begin implementation on April 10 and is expected to affect more than $3 trillion of retirement assets in the United States.

Earlier this month, president elect Trump nominated Andrew Puzder, CEO of CKE Restaurants, as the next Department of Labor (DoL) secretary. If Puzder’s own track record on his company’s 401(k) policies is any indication of his leadership, he will most likely not support the new rule.

Working to accelerate the discussion, Senator Ron Johnson R-Wisconsin last month wrote a letter urging Labor Secretary Thomas Peres to stop implementing the rule. Johnson asks the Labor Department “to cease implementation of the regulation immediately to spare low- and middle-income Americans, financial advisors and small businesses from the unnecessary and avoidable burdens that will drive up the costs of services and decrease access,”

Johnson’s plea is well founded. According to CoreData Research, which polled 552 U.S.-based advisors and was conducted by the firm’s UK arm, 71% of the advisors plan to “disengage from some mass-market investors” because of the DOL rule. On average, these advisors estimate they will no longer service a quarter (25%) of their mass-market clients.

More recently, the U. S. Chamber of Commerce called on the Trump Administration to take immediate action to unto the DoL Fiduciary Rule citing that if enacted it would “choke economic growth, increase frivolous litigation against financial advisers, and make saving for retirement more difficult for hardworking Americans.”

All this makes sense as broker/dealers are going to find it difficult to be able to comply with the requirement given their platforms and firm policies. In an interview with Investment News, Knut Rostad, founder and president of the Institute for Fiduciary Standard issues a warning to advisors who may get caught without a compliance plan. “The potential power of fee transparency is under appreciated. The potential impact of getting to true fee transparency is underestimated.” says Rostad. “Irrespective of whether it goes through or not, firms will claim fidelity to their definition of a best interest standard. They will rush up and down the street waving the fiduciary flag.”