US Fiduciary Rule hit with Labor Dept plan for 18-month delay

A controversial, Obama-era set of regulations that seeks to require those advising on Americans’ retirement products to put their clients’ best interests first has been hit with what could be a potentially major set-back that could see the final date of compliance pushed back to 1 July, 2019, from the 1st of January next year.

The latest in a series of setbacks to have hit the Fiduciary Rule since Donald Trump became president came yesterday in the form of a Labor Department proposal to delay the final implementation date by 18 months.

According to media reports out of the US, the Labor Department filed a proposal to push back the date on Wednesday with the Office of Management and Budget, as part of its ongoing review of the regulation, proposed by President Trump.

According to the reports, the Labor Department, which has been the arm of the US government that has been tasked with putting the Fiduciary Rule into place, also said it is considering loosening restrictions on the types of transactions that would be prohibited under the rule, including insurance products and rollovers of individual retirement accounts.

News of the effort to postpone the final starting date for the Fiduciary Rule was seen as further evidence that the legislation is likely to undergo significant revisions by the time it finally comes into force.

As reported, the first stage of the Fiduciary Rule’s implementation took effect in June.

However, there have been a number of efforts, mainly by Republican party lawmakers, to derail the legislation, including the introduction of legislation in both the House and Senate that would kill the bill and establish a less onerous standard.

One such bill, called the Financial CHOICE Act, was approved by the House of Representatives in June, but was seen a facing long odds in the Senate.

Representative Ann Wagner, a Republican from Missouri, introduced her Fiduciary Rule-tweaking legislation in July.

Until news that some forces, including top Republican lawmakers, were keen to see the Fiduciary Rule scrapped, few Americans had heard of the rule, and, it subsequently has emerged, most had assumed those advising them on their retirement investments placed their interests first.

But the issue has now spilled over into personal finance columns and editorial pages of newspapers and other publications (the New York Times came out in favour of it, saying it would “help working people”, while the Wall Street Journal called it an “arrogantly conceived” piece of “destructive” regulation.)

US RIAs ‘already
held to fiduciary standard’

As reported, Registered Investment Advisors (RIAs) in the US have been held to a “fiduciary standard” since 1940, and many of them say they see no reason why they should not being obliged to put their clients’ interests ahead of their own when selling them financial products – which is what the Fiduciary Rule seeks to do with those advising on retirement products.

However, US insurance and pension scheme brokers, who currently are required to meet a lesser “suitability standard” when selling retirement products, oppose the introduction of the Fiduciary Rule on the grounds that it will increase their costs and ultimately, dissuade people from planning for their retirement. “Critics on Wall Street have called it overly burdensome, and say that the cost of compliance would likely exceed the Labor Department’s US$31bn estimate,” a Reuters report noted last night.

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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