The Trump Effect

The wheels have been put in motion to delay the fiduciary rule.

The delay is not unexpected, as it’s been a wild ride since President Trump was elected and took office. The stock market has rallied in anticipation of “Trumponomics” (the President’s campaign promises to stimulate the economy) and has generally ignored unfriendly talk of trade restrictions and anti-immigration policies. 

Now with a new Labor Department Secretary poised to be confirmed, President Trump has moved his energy to tackling the Labor Department’s fiduciary rule by an issuing an Executive Order suggesting a delay in the effective date.  The first draft of the Executive Order provided to the press, suggested a 180 day delay but the final Executive Order removed that specific delay timeline (likely to give Labor Secretary nominee Andrew Puzder wiggle room during the nomination process).  It will be up to the Labor Department to provide the "official" delay.

Ironically, the suggested delay comes a day after Punxsutawney Phil let us know that six more weeks of winter must be endured.  Indeed, this is Groundhog Day once more for fiduciary reform as proposals that force commissioned-based investment professionals to put their client’s interests ahead of their own, have been starting and stopping over and over again for the last seven years.                                                                                                      

What are the Details?

President Trump issued a memorandum to the Secretary of Labor today cautioning that the rule “may significantly alter the manner in which Americans can receive financial advice, and may not be consistent with the policies of this Administration.” It calls for an updated economic and legal analysis to examine whether the rule is likely to harm investors due to a reduction in access to retirement accounts or advice, and whether it has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees.  The latter a point that has been made consistently in litigation that has challenged the rule.

The Labor Department is also directed to consider whether the fiduciary rule is likely to cause an increase in litigation, or an increase in the prices that investors and retirees must pay. The order also pushes for consideration as to “whether the prohibited transaction exemptions issued in conjunction with the rule substantially undermine the rule’s effectiveness at achieving its intended goals”.

The memorandum notes that if the Labor Department concludes for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with the policy of this Administration, then the Labor Department is instructed to publish for notice and comment a proposed rule “rescinding or revising the rule as appropriate.”                                                                                              

What’s Next?

Clearly the message is “STOP!” and take a long, hard look at the fiduciary rule.  The good news though is that the industry has spent a significant amount of time and energy preparing for compliance with the rule.  The practices implemented by large financial institutions will likely stay in place....which is a good thing.  Shame on those who will use this as an opportunity to pull the plug on internal reforms which protect investors!  We will keep you posted as we begin to understand what the Trump Administration has in mind but clearly the tone of the memorandum indicates that there is grave concern on the rule as presently outlined.  Stay tuned...

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