Top of Mind

Some "Top of Mind" Thoughts on the Fiduciary Rule Delay

While Trump’s Presidential Memorandum requesting the Secretary of Labor to analyze the Fiduciary Rule was not a direct request for a delay in the applicability date, his directive had the same effect. We are covering the delay extensively, most recently in this Compliance Alert as well as next week’s edition of Staying Ahead of the Curve.  The internet is abuzz with speculation as to the future of the Fiduciary Rule; and while we here at Cammack Retirement Group do not have a crystal ball, we wanted to provide our Top of Mind thoughts on the subject:

  1. “The genie is already out of the bottle” with respect to compliance on the new rule — ironically, it may turn out that the very group most opposed to a delay in the applicability date might be the financial services industry, which Trump intended to benefit by issuing his memorandum.  Why? Because a lot of firms have already spent a considerable amount of time and effort complying with the new Fiduciary Rule, considering it was effective last year.  At that time, it was considered to be a near certainty that the rule would be implemented in April of 2017.  In fact, some firms have made changes such as eliminating commissions which are unlikely to be unwound, even if the Fiduciary Rule is rescinded.
  2. Even if the rule is withdrawn, many investors  are now aware of the concept — Given the news coverage of this issue, there are far more investors  than there used to be who are aware that some advisers are not obligated to act in the best interest of investors. Think about it, if you are a participant and you know that fiduciaries must act in your best interest, why would you choose someone to be your adviser who is NOT a fiduciary?
  3. While it is possible that the rule will be completely scrapped, modification of the rule appears to be more likely — Back in November, we discussed some of the difficulties of completely rescinding a rule that is already effective. Not much has changed since then, other than the Presidential Memorandum where Trump could have chosen to take more definitive action to address the rule (such as a six-month delay in the effective date or a recommendation to pursue a stay of litigation involving the rule). Thus, it would not be surprising to see elements of the Fiduciary Rule survive.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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