The U.S. Department of Labor has proposed delaying by 60 days an Obama-era regulation regarding retirement savings accounts. This move may be a prelude to the significant alteration or repeal of the fiduciary regulation instituted as part of Dodd-Frank, which established the standards for brokers to act in the best interest for their clients in retirement planning (rather than simply making recommendations that were “suitable”).
Last month, President Trump signed an executive order calling for the Department of Labor to review the rule and either revise or rescind it. The department has now taken up the request and will spend the next 15 days taking comment on the delay and another 45 to take comment on the rule itself. Importantly, the regulation itself had not been formally made effective yet (that date was initially set for April 2017), meaning that no advisor will lose their fiduciary status should the department rescind the regulation.
While critics of the rule have asserted that imposing restrictions on brokers could restrict more individuals’ ability to receive financial advice, proponents of the rule believe that keeping it would raise the standard of management for $3 trillion worth of retirement assets. As the law currently stands, brokers are only required to make “suitable” trades, meaning that the broker is not required to act in the clients best interests and may be more prone to overtrading or engaging in other practices to earn a higher commission. Retirement security is vital to not only those nearing retirement, but to the economy as well due to the large number of Baby Boomers leaving the workforce. The fiduciary rule’s replacement, should it become necessary, must ensure that all Americans have access to retirement-savings vehicles and the appropriate means to protect their investments and their futures.
For more, visit the Wall Street Journal.
Photo Credit: Department of Labor