Fiduciary Rule postponed – sort of

I wrote about the new fiduciary rule in my blogpost of June 27, 2016.  I won’t rehash that except to say that the rule was intended to make advisors work in the interest of their clients, not their own interest. A noble goal, and there were reasons for it, but it was so complex that it was mostly unworkable.

To no one’s surprise, the Trump administration announced that it had instructed the DOL to reconsider the rule, specifically, to:

  • conduct an updated economic and legal analysis concerning the likely impact of the rule to examine whether the rule has harmed or is likely to harm investors due to a reduction in access to retirement accounts or advice;
  • consider whether it has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees (the latter a point that has been made consistently in litigation that has challenged the rule); and
  • determine whether the rule is “likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.”

What is interesting is that there is no timeline associated with this review.  Quoting my own prescient (if I do say so myself!) remark, with underlining for emphasis:

The rule is effective June 7, 2016, but the applicable date is April 10, 2017.  (When something doesn’t make sense, think “money” or “politics” or both.  In this case, it is politics – they can’t make changes like this with true immediate effect, so they made it “applicable” a year after the rule was issued.  But by making it “effective” in 2016 it is harder for a new administration to un-do it.)

At that time, they didn’t know that HIllary Clinton was a shoo-in who couldn’t lose (just like the Falcons with a 25 point lead in the third quarter), and hedged their bets against a hostile administration (read that as you wish – “hostile” or “hostile to the new rule”).  Pretty clever, one must admit. It effectively takes a new rule to un-do the now-existing rule, with hearings and whatnot.

So…we really don’t know where we are!  Most of us expect that they’ll eventually delay or temporarily suspend the rule, and later change or repeal it, but as it stands now, we have an April 10 applicability date. I’m not going to muse about what that really means!  Let it be a problem to be addressed by brokers and broker-dealers who (may) have to comply with it, for now.

I will muse about this:  what if they made a rule that just said “Don’t rip off your clients”?