Key parts of the Department of Labor’s “Fiduciary Rule” will go into effect on June 9, 2017. President Trump’s executive order requiring the department to re-evaluate the rule delayed the rollout, originally scheduled for April 10.
Also known as the Conflict of Interest rule, the new rule holds brokers and advisors to a higher standard when providing advice about retirement accounts. Previously, advisors had to steer clients into “suitable” investments. Now, they must act as fiduciaries and put the client’s interest above their own. It is expected that the higher standard will prevent billions of dollars in hidden fees from being siphoned off retiree accounts.
The remaining portions of the rule are scheduled to be fully rolled out by January 1, 2018, but this is not a certainty. The Department of Labor is continuing its evaluation. Consumer groups and some Democratic Senators are concerned that as a result of the review process, the rule could be significantly modified – or perhaps even repealed. Opponents of the fiduciary standard, which includes many in the financial industry along with de-regulation advocates, argue that it restricts investor choice and imposes an unreasonable compliance burden on advisors, particularly on smaller firms.
Read the Department of Labor’s Frequently Asked Questions on this topic here.