Recent Developments on the DOL Fiduciary Rule

Cheri Franklin |

When we reported back in June that the DOL Fiduciary Rule (which requires brokers to act in the best interests of retirement savers rather than sell products that are merely suitable and possibly more profitable) had finally gotten the green light, we may have spoken too soon. On August 29th, the Office of Management and Budget approved an 18-month delay until July 1, 2019 of key provisions including the final compliance deadline. A report from the Economic Policy Institute estimates the cost of this delay to consumers at about $11 billion. The opposing side of the argument claims that it would limit investment choices, increase costs and possibly cut-off low balance consumers from professional financial advice. Our response to that argument is that the quality of the advice that low net worth investors have received from brokers is subpar, at best. Most of them would be better off with a simple and low-cost solution from a reputable firm like Vanguard. Please note that a fiduciary is under no obligation to provide services at a low cost. In fact, as the article cited below points out, the partial implementation of the Fiduciary Rule “has turned out to be a boon for Wall Street as firms push customers into the fiduciary-friendly—and typically more lucrative—accounts that charge an annual fee.” This sounds to us like the typical 1% of assets we so commonly see.

A Wall Street Journal article on 9/13/2017 entitled “States Take Up Investor Defense” details how certain states such as Nevada and Connecticut have already passed legislation to expand or amplify fiduciary requirements for brokers, and they are not limited to just retirement accounts. Other states, including New York and California, have legislation pending or being formulated. On the federal level, there is a strong possibility that it will be struck down by the House of Representatives when it passes its next spending bill. However, the prospects of this takedown surviving the Senate are dim. If the Senate did vote in concert with the House, then we believe that President Trump would certainly sign it into law, leaving it open to the states to each pass their own version which would create a compliance nightmare.

In closing, we agree with Michelle Brownstein of Personal Capital who said on CNBC, “I don’t know anyone who would choose to go to a doctor that hasn’t taken the Hippocratic Oath…so taking financial advice from someone who does not have to act as a fiduciary to you is something I would not condone.” If you would like to know more about how a true fiduciary can help you achieve your financial goals, please call us at 800-345-4635 or e-mail us at