Just as many Washington observers had thought might happen in the wake of Donald Trump’s election, a US Congressman has introduced a bill that is aimed at delaying the Department of Labour’s Fiduciary Rule from coming into force in April.
The bill was introduced on Friday in Washington by a Republican member of the House of Representatives from South Carolina named Joe Wilson, who is calling it the “Protecting American Families’ Retirement Advice Act”.
The Fiduciary Rule, if enacted, would hold anyone in the business of marketing retirement products to consumers to a “fiduciary standard”, meaning that they would be obliged to act in the “best interest” of their clients, and be able to demonstrate that they did.
In a statement on his House of Representatives website, Wilson said the Fiduciary Rule was “one of the most costly, burdensome regulations to come from the Obama Administration”, and that, rather than making retirement advice and financial stability more accessible for American families, the Obama Administration had “disrupted the client-fiduciary relationship, increased costs, and limited access”.
“This legislation will delay the implementation of this job-destroying rule, giving Congress and President-elect Donald Trump adequate time to re-evaluate this harmful regulation,” Wilson said.
As reported here in November, US market observers predicted that the Fiduciary Rule was one of a number of regulations that were likely to get the chop once Trump was in the White House, although the speed with which this bill has been introduced is likely to come as a surprise to many.
Some observers had predicted that a delay would be proposed in order to buy time for a formal repeal of the legislation, which would normally take longer to bring about.
US insurance brokers and a number of major American financial services companies have strongly opposed the introduction of the Fiduciary Rule, on grounds that it would increase their costs. Major players in the US debate have included Morgan Stanley, Merrill Lynch and Wells Fargo. At least one retirement products industry organisation, the National Association for Fixed Annuities, actually filed suit in an effort to halt the rule’s implementation.
However, regulated financial advisers in the US have been held to a “fiduciary standard” since 1940, and many of them say they see no reason why being obliged to put their clients’ interests ahead of their own when selling them financial products should not be mandatory for those selling insurance products and retirement plans as well. Currently, US insurance brokers must meet a lesser “suitability standard”.
Australia recently adopted a concept identical to America’s Fiduciary Rule, as part of its Future of Financial Advice reforms, which came into force in 2013, but called it the “Best Interests Duty”, because it requires advisers to “act in the client’s best interests”. As reported, Australia began to enforce this new rule last year, taking action first against an advisory business in Melbourne in June, and banning a Brisbane adviser for five years.
In his statement announcing his bill, HR355, Wilson said his supporters include Dirk Kempthorne, president and chief executive of the American Council of Life Insurers, Tim Pawlenty, chief executive of the Financial Services Roundtable, and Paul R Dougherty, President of National Association of Insurance and Financial Advisors.
Wilson’s website announcement also includes an endorsement from Cathy Weatherford, President and chief executive of the Insured Retirement Institute, who said: “We thank Congressman Wilson for his leadership on this important issue. We have long-standing concerns about the rule and its harmful impact on retirement savers.
“A delay is much needed, and will provide more time to policymakers to reevaluate it, and protect consumers from its negative consequences.”
No known comment on rule from Trump
Although one of Trump’s campaign promises was that he would take an axe to a number of regulations that were brought in during Obama’s presidency, he isn’t thought to ever have actually mentioned the Fiduciary Rule himself, leaving that to one of his advisers, hedge fund executive Anthony Scaramucci. Trump recently named an anti-regulation businessman, Andrew Puzder, as his choice for secretary of labor, but Puzder is also not known to have commented on the Fiduciary Rule.
To read Wilson’s statement on his website, click here.
To read the bill, also on the congressman’s website, click here.
To read how the current US debate over the Fiduciary Rule is sparking conversation about the concept of a fiduciary standard, and whether there could be a case for a global Fiduciary Rule, click here.