The extension gives the DOL time to consider public comments submitted following a Request for Information that was sent out in July.
The fiduciary rule states that financial advisers must serve as fiduciaries for clients, a new standard that seeks to have advisors serve their clients best interests and not their own. It is a higher standard than the previous suitability standard, which said that as long as the recommendation met a client’s need, it was suitable. With the new standard, investments must be in clients’ best interest, not just suitable. It could have the impact of changing the commission structure in the industry.
The DOL said that during the transition period, advisors are obligated to adhere to “impartial conduct standards” – or best interest standards. Additionally, they must charge no more than reasonable compensation for their services, and refrain from making misleading statements. Further, during this period the DOL will not pursue claims against fiduciaries working diligently and in good faith to comply with the rule.
“We applaud the DOL’s decision to delay the remaining portions of its fiduciary rule for 18 months,” Dale Brown, president and CEO of the Financial Services Institute, said. “This delay will allow the DOL to conduct a thorough review of the rule, as ordered by President Trump, to ensure investor choice and access to retirement savings advice is protected. In addition to the rule review, we are encouraged by the DOL’s statement that they will coordinate with other regulators, including the SEC, to simplify and streamline the rule.”
In a Feb. 3, 2017 memo, Presidential Trump directed the department to do an analysis of the potential impact of the rule on access to retirement information and financial advice.
The American Council of Life Insurers (ACLI) concurred, saying the delay will give the department time to adequately review the rule and determine the next steps.
“The fiduciary regulation has harmed small and moderate retirement savers by restricting or eliminating access to retirement products and services, creating an advice gap for those most in need of help,” ACLI President and CEO Dirk Kempthorne said. “Its bias against commission-based arrangements restricts consumer access to annuities – the only product in the marketplace providing guaranteed lifetime income.”
A collaborative and harmonized approach is necessary, Kempthorne added.
“Full implementation of the regulation must be delayed to allow the department, state insurance regulators, the Securities and Exchange Commission, FINRA and Congress to work in concert on reasonable and appropriately tailored rules that require all sale professionals to act in the best interest of their customers,” he said.