After US Secretary of Labor Alexander Acosta announced last month that the department could find “no principled legal basis” to delay it any further, the Obama administration’s controversial fiduciary rule went into effect on Friday, June 9 as scheduled—though its legal enforcement mechanisms will not become effective until January 1, 2018. The rule, which requires financial advisors to act in their clients’ best interests when advising them about retirement, may still be revised through regulatory or legislative action, but in the meantime, employers that sponsor retirement plans now have an obligation to ensure that their advisors are following the fiduciary standard, experts tell Paula Aven Gladych at Employee Benefit News:
At this point in the process, retirement plans should know if their adviser is working in their best interest or is a broker-dealer with potential conflicted advice offerings. If they don’t know that, they need to call their service providers to find out. Plan sponsors should also review the letters they receive from their plan advisers and take note of whether some services they were receiving in the past won’t be available because their service provider can’t provide them without having fiduciary status. …
“The smaller a plan is, the more likely [it is] that you’re going to have conflicted advice under the new rule,” explains Douglas Dahl, counsel at Bass, Berry & Simms, a law firm in Nashville. Dahl recommends that plans under $50 million in assets attempt to follow the model set out by larger plans. That means knowing who takes fiduciary responsibility for the retirement plan at their company.
Republicans in the US House of Representatives, meanwhile, are pursuing multiple routes toward repealing (and potentially replacing) the fiduciary rule, US News and World Report economy reporter Andrew Soergel notes. The Financial CHOICE Act, which the House passed on Thursday, would do away with the fiduciary rule as part of a suite of deregulatory measures paring back the Dodd-Frank financial reforms of 2010. That bill may or may not survive as-is, Soergel reports, but it’s not the only effort at fiduciary rule repeal in the legislature:
The Choice Act’s prospects in the Senate don’t look great, considering the considerable opposition Democrats have put up in response to the legislation, and the fiduciary rule-repeal could end up being among a number of its tenets dropped during Senate deliberations.
Yet Republicans don’t appear to be taking chances on the fiduciary rule’s implementation. Just hours before voting on the Choice Act, Reps. Phil Roe, R-Tenn., and Peter Roskam, R-Ill., on Thursday introduced the Affordable Retirement Advice for Savers Act, which also would overturn the fiduciary rule.
According to the House Committee on Education and the Workforce, Roe and Roskam’s bill would overturn the fiduciary rule but establish a statutory definition of “investment advice” and require advisors to act in their clients’ best interests, albeit without subjecting them to blanket fiduciary liability, while also subjecting them to certain disclosure requirements.