Good news for retirement savers—the fiduciary rule will become applicable June 9th
Every year, retirement savers lose $17 billion because they receive bad advice from financial advisers—like being steered into investments that provide larger payments to the adviser but lower returns for the saver. Currently, that fleecing of retirement savers is legal. Unlike the strict requirements in place for lawyers and doctors, not all financial advisers are legally required to act in their clients’ best interest. Just over a year ago, the Department of Labor issued a rule (known as the “fiduciary rule”) that would close this loophole and require financial advisers to act in the best interest of clients saving for retirement. But the Trump administration has made its interest in weakening or rescinding this rule clear. Following direction from President Trump, the Department of Labor delayed the implementation of the rule by 60 days, from April 10th to June 9th, to conduct a new “examination” of the rule, despite the fact that the department has already conducted an exhaustive analysis.
Secretary of Labor Alexander Acosta, after earlier saying he was actively seeking a way to further “freeze the rule,” has now stated that while the Department “should seek public comment on how to revise this rule,” they “have found no principled legal basis to change the June 9 date while we seek public input.” The fact that there will be no further delay is very good news. Further delay of the rule would have been a huge win for the financial industry and a huge loss for retirement savers all across the country, with every additional week of delay costing retirement savers $431 million over the next 30 years. However, while the rule’s fiduciary standard will take effect on June 9th, key compliance provisions built into the rule’s exemptions have been further delayed to January 1st, 2018. Moreover, the department has stated that it will not enforce the rule the during the gap period between June 9th and January 1st. This means the loopholes that allow financial advisers to take advantage of savers are not fully closed, and retirement savers will continue to be harmed during this period. Further, it is far from certain that the rule will in fact become fully applicable on January 1st. The Department has made clear (see Q4 in these Department of Labor FAQs ) that—as requested by the financial industry—they are considering proposing additional changes to the rule and delaying it beyond January 1st. Thus, we can expect further attempts in coming months to weaken and delay the rule—actions that would yet further harm retirement savers. In order to truly protect retirees and working people saving for retirement from predatory financial advisers, we need a fully applicable, vigorously enforced rule to protect their savings from the large losses that conflicted advice is causing.