Filed under: High Net Worth Individuals, Personal Financial Planning
By Megan Kuchan, CPA
Updated on February 14, 2017, to add the latest information on the delay on ruling. See the end of the article.
On February 3, 2017, President Donald Trump signed a directive to delay implementation of the Department of Labor (DOL) fiduciary rule. Originally set to be effective this coming April, the postponement will allow the Trump administration additional time to review the potential changes.
In development for several years, the fiduciary rule was one of the former administration’s triumphs. Former President Barack Obama heralded the rule as necessary for protecting investors and retirees from investing in products that have unacceptably high fees and hurt overall savings.
As outlined by the Obama administration, the fiduciary rule was scheduled to impose a higher standard of independence between investment brokers and their clients. The presidential directive Trump signed on February 3, however, orders the DOL to review their prior analysis and determine if the proposed rule would affect investors unfavorably.
Whether you are for or against this new rule, it has already begun making an impact. For example, some financial institutions were in the process of adopting the new fiduciary rule in advance of the April implementation date. With the official regulation on hold, many may continue to adopt the new standards they were already introducing to their investors. However, Trump’s directive delay may also motivate financial institutions to forgo implementing the adjustments outlined in the final rule.
What does this mean for you? Legally, it means no change in the immediate future. However, as an investor, you should ask informed questions of your financial advisors to ensure you are working with someone who is acting in your best interest.
To be clear, many investment advisors already have a fiduciary duty toward their clients, meaning they are legally required to act in the best interest of their client. The stay on the fiduciary rule won’t change that requirement; if your advisor is already held to that standard, they will continue to act as a fiduciary.
Additionally, it is always a good idea to understand where your money is going. What fees are being charged on your investments? How is the advisor paid? Advisors may recommend many different investments. Some operate under a fixed fee while others generate various commissions from investments you make.
Asking questions and staying informed is the best way to get ahead financially. Your accountant is a good resource for an objective opinion. If you have any questions about the fiduciary rule, contact your Clark Nuber advisor.
UPDATE – 2/14/2017: It was originally reported that President Donald Trump’s February 3rd executive directive ordered the delay in the implementation of the fiduciary rule. However, once the final presidential memorandum was published, it was determined he officially requested that the Department of Labor (DOL) reexamine the fiduciary rule and analyze whether it would, “adversely affect the ability of Americans to gain access to retirement information and financial advice.”
Subsequently, the DOL requested approval for a 180-day delay in the implementation of the fiduciary rule to complete this request. Though the result is the same, the delay of the April 10 original effective date is being sought by the DOL, rather than directly from the presidential administration.
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