Update ~ DOL Fiduciary Rule will Require Investment Advisors & Brokers to Follow Fiduciary Requirements
Labor Secretary, Thomas Perez received high marks for guiding the fiduciary rule through the regulatory shoals, but now supporters question whether he gave away too much…
Investment News, Mark Schoeff Jr. reported, When Labor Secretary Thomas Perez last week rolled out the final version of a regulation that would raise investment advice standards for retirement accounts, he achieved a major milestone for a measure that was first proposed nearly six years ago. For the first time, investment advisers and brokers will have to adhere to the same fiduciary requirement — acting in the client’s best interests — at least when working with 401(k) and individual retirement accounts. While some industry groups that had strongly opposed the DOL fiduciary rule say they are still studying it, others that had supported it criticized Mr. Perez for making too many revisions in an attempt to appease the opposition. Some observers gave the secretary credit for pushing the historic rule across the finish line, something the Securities and Exchange Commission has not been able to do.
“They got something off the launchpad that we’ve been waiting decades to see, which is a more balanced way of handling personalized investment advice,” said Kurt Schacht, managing director of the CFA Institute. “Hats off to DOL. No one else has been able to move the needle on that.”
BLASTED BY CRITICS – Congressional opposition has remained resolute. House Speaker Paul Ryan, R-Wis., and Senate Majority Leader Mitch McConnell, R-Ky., both immediately lambasted it and vowed to try to halt it. Although most financial industry trade groups say they are still studying it, they also continue to be wary of what they call a complex and costly rule. Mr. Perez promised skeptics that the final rule would address concerns raised about the proposal — introduced in April of last year — in more than 3,000 comment letters, 100 DOL meetings and four days of public hearings. Indeed, the final version — a 1,023-page rule — was significantly revised, including a reworking of its centerpiece, the best interest contract exemption. The exemption allows brokers, who currently only have to meet a suitability standard in recommending investments, latitude in their compensation arrangements, including charging commissions or taking revenue sharing, as long as they sign a legally binding document that obligates them to put their clients’ needs above their own.
Mr. Perez said last week that the DOL made the rule “more workable and doable.”
“We listened, we learned and we adjusted,” he said. “I am quite confident industry will be able to comply with the streamlined rule.”
Ed Gjertsen, vice president of Mack Investment Securities, a hybrid advisory firm, and chairman of the Financial Planning Association, said the DOL realized the regulation would have to be effective in today’s diverse advice marketplace. Read More>>>