Attack on DOL Fiduciary Rule Escalates

The Department of Labor’s (DOL) Fiduciary Rule, which is set to become generally effective on April 10, 2017, has received substantial push-back from the financial industry, including numerous lawsuits and proposed legislation which are questioning the validity of the rule.  However, the attack has been escalated by Rep. Joe Wilson, (R-S.C.), who introduced legislation on January 6, 2017 that would delay the implementation date of the fiduciary rule by two years.

In discussing the proposed legislation (Protecting American Families’ Retirement Advice Act) , Rep. Wilson, a member of the House Committee on Education and the Workforce, noted that “this legislation will delay the implementation of this job-destroying rule, giving Congress and President-elect Donald Trump adequate time to re-evaluate this harmful regulation.”

Ultimately there is a wide rift between the supporters of the fiduciary rule, who believe that raising the investment advice standards for retirement accounts, including IRA Accounts, is necessary to protect retirement investors from high-load investment products that can erode retirement savings and its critics, who believe that the fiduciary rule is overly burdensome, will increase the cost to give and receive advice and will ultimately injure smaller investors, who will be frozen out of access to qualified advisors.

With that said, based on the changes in the political playing field in Washington from 2016, it is generally anticipated that legislation targeting the fiduciary rule will get traction, and may possibly be expedited by the new administration.  Additionally, president-elect Donald Trump has been very vocal in his opposition to the fiduciary rule, and he announced in December his intention to nominate Andrew Puzder as the next secretary of the DOL.  Given Mr. Puzder’s public statements and his conservative philosophical perspective, it appears that Puzder will arrive at the DOL with strong free market views, and a desire to reduce government regulation.  Thus, with the combination of proposed legislation and a change in DOL leadership, it appears that this attack may be successful.

However, April 10 is just around the corner, and to the extent a political solution is not achieved by the new administration and the Republican majority, financial organizations will have to be in compliance with the new fiduciary rule, or face potential DOL enforcement actions.