Depart of Labor Fiduciary Rule Still Under Review, but Will Take Effect June 9th

Jun 7, 2017


Depart of Labor Fiduciary Rule Still Under Review, but Will Take Effect June 9th

The Department of Labor (DOL) fiduciary rule that was supposed to go into effect April 10, 2017 is now set to take effect on June 9, 2017. While many in the Trump administration oppose the new rule, newly installed Labor Secretary Alexander Acosta felt that further delay in implementation would not be consistent with the law. However, Secretary Acosta is committed to continuing to review the rule and many feel that the rule will likely be revised before the end of the rule transition period on January 1, 2018.

Continuing Review

The DOL is reaching out to the Securities and Exchange Commission (SEC) for help in reviewing the fiduciary rule. The SEC and the DOL have been at odds for years over the creation and implementation of the fiduciary rule. Because the rule deals specifically with retirement accounts and advisors, it seems natural for the SEC to be involved in the crafting of such a regulation because of its deep, institutional experience in regulating financial markets.

The fact that the DOL is the organization behind the regulation has been a source of criticism from many corners. Many feel that the DOL lacks a “big picture” understanding of how this rule will affect retirees, brokers, advisors, and the market.

The Rules Transition Period

Even though the rule goes into effect on June 9, 2017, many of the biggest and most controversial parts of the rule are not set to go into full effect until January 1, 2018. This period is to allow companies and individuals to create all the required changes to their marketing and client disclosure forms.

Even though the rule has been public for more than  a year, there is a still a lot of confusion over who is covered and what changes need to be made.

The Basics of the Fiduciary Rule

The new rule increases the number of people who are to be considered fiduciaries when advising retirement plan sponsors and participants. Before the rule change, many advisors and brokers simply had to meet a suitably standard. Suitability meant that advisors only had to show retirement clients options that fit their financial objectives. The fiduciary rule will require these advisors to disclose any potential conflicts of interest, including commissions, as well as require advisors to offer their clients investments that are in their best interests.

While many employers that sponsor retirement plans worry about how this rule affects their responsibilities, they are already fiduciaries and this rule does not change that. However, the rule will change the way salespeople approaching employers with different plans for their employees present the different options.

Many in the financial advisor community feel that the rule is too strict and in the end will not serve retirees. The concerns are that it requires changes too quickly, it seeks to fix a problem that there is little evidence of existing, and the regulators fail to fully understand how the retirement investment industry actually works. 

While the rule is now in effect, there seems to be enough industry pushback and political skepticism that the rule will likely be weakened before the end of the transition period. 

Todd Miller

Written by Todd Miller

Director of Marketing, DHR

Todd leads DHR’s marketing department and is responsible for overall marketing strategy and execution. With nearly 15 years in the sourcing services and solutions space, Todd provides interesting insight on a variety of topics in this fast-paced and ever-changing industry.

Todd lives in Scottsdale with his two daughters and Collie/Shepard. One is a good boy.

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