US Fiduciary Rule gets formal delay from OMB

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The White House’s Office of Management and Budget has approved the Department of Labor’s request to push back the final implementation date of its so-called Fiduciary Rule to July, 2019, US media are reporting. 

The development is being seen by those on both sides of the controversial Obama-era legislation as the likely beginning of a dismantling of key elements of what was introduced in an effort to require those advising clients on retirement products and investments to put their clients’ interests first.

“Experts,” The Wall Street Journal reported today, “tell The Journal that the DOL will likely significantly revamp the final rule during the scheduled re-evaluation period”.

As reported,   the Labor Department filed its proposal to push back the final implementation date on 9 August, as part of its ongoing review of the regulation, which had been proposed by President Trump.

The initial element of the rule came into force on 9 June,  two months after it was originally due to take effect, after President Trump in February issued an executive order calling on the DOL to undertake a study of the rule to assess whether its implementation would limit investors’ access to investment products or advice, and/or disrupt the industry.

In recent weeks, speculation about the direction reforms to the Fiduciary Rule were likely to go have focused on a clause that concerns the ability by those who felt their best interests hadn’t been sufficiently considered to join forces in a class-action lawsuit.

The focus on this aspect of the legislation was prompted by revelations contained in court documents in connection with  a recent lawsuit filed by a US insurance company against the DOL, with respect to the Fiduciary Rule.

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, have fiercely opposed the introduction of the Rule, on the grounds that it would increase their costs and ultimately, dissuade people from planning for their retirement.

Some have argued that the cost of compliance would likely exceed the Labor Department’s US$31bn estimate.