U.S. Labor Department extends fiduciary rule implementation date
The U.S. Department of Labor is proposing an extension of the applicability dates of the fiduciary rule and related exemptions implemented by the Obama administration, including the “best interest contract exemption,” from April 10 to June 9.
The announcement follows a memo issued by President Donald Trump on Feb. 3 that directed the DOL to examine the fiduciary rule to determine whether it might adversely affect the ability of Americans to gain access to retirement information and financial advice.
The proposed extension is intended to give the department time to collect and consider information related to the issues raised in the memorandum before the rule and exemptions become applicable.
The department will accept public comments on the proposed extension for 15 days following its publication. Comments on issues raised in the presidential memorandum will be accepted for 45 days.
The proposal can be viewed here.
Impact of delay unclear
The DOL's fiduciary rule, created under the Obama administration, was designed to ensure that financial advisers act in the client’s best interest, avoid conflicts of interest and are transparent about compensation and fees.
Mainebiz reported in November that Maine banks, wealth management firms and other financial advisers were already gearing up to meet the new fiduciary rule’s originally scheduled April 10 implementation date.
Christopher Pinkham, CEO of the Maine Bankers Association, told Mainebiz the banking industry embraces the DOL's fiduciary rule, especially since modifications were made to address the banking industry's initial concerns about its scope and potentially negative impacts related to bank CDs being used as an IRA investment.
Pinkham said all of Maine's 31 retail banks "provide some type of retirement service," with roughly half offering significant trust and wealth management services that already are based on the fiduciary standard of being ethically bound to act in the client’s best interest and which involve fee-for-service charges, instead of commissions that can create at least the appearance of a conflict of interest.
"The bulk of this rule addresses 'transparency,'" Pinkham said at that time, noting that the banking industry supports the rule's overarching goal of offering greater protection to consumers' investment accounts.
Brian Bernatchez, a certified financial planner who is the founder, president registered principal of Golden Pond Wealth Management in Waterville, said told Mainebiz last fall his firm was embracing the rule as “an opportunity.”
Bernatchez said that to the extent that the DOL fiduciary rule encourages greater disclosure by financial planners and greater understanding by consumers, it should lead to a stronger investment adviser industry and greater confidence by its customers that their retirement assets will be there when they need them.
A Feb. 6 commentary in the Washington Post by Barry Ritholtz, chief investment officer of Ritholtz Wealth Management, concluded that even if the Trump administration eventually decides to nix the fiduciary rule and thereby return to the status quo, it might already be a moot point.
“The fiduciary rule is not shaping investor behavior, it is now catching up with it,” Ritholtz wrote. “It has been six years since the SEC study suggested the standard; while the commission has been stalemated by politics and the Labor Department by the new administration, they are both now far behind the curve. … Changing the new rule implementation plan won’t stop the underlying trend — at worst it might slow it somewhat.”
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