Articles Tagged with DOL

Financial industry stakeholders are all locked in a guessing game about the fate of the DOL Fiduciary rule in the new Trump administration. In 2015, the Obama administration and the DOL had introduced the Fiduciary rule that requires financial advisers to always act in the best interest of their clients when handling their retirement savings and removing unnecessary fees. Wall Street had continued to oppose it on the grounds of excessive costs and paperwork. The initial implementation deadline for the rule is set for April 2017.

According to an Investment News report, industry lobbyists are now expecting a quick response from the seemingly “business first” Trump administration to delay this investment advice rule. They expect the Fiduciary rule to be one of the first targets of the new administration. This delay could come in the form of a directive to agency heads to review and delay regulations that are not operational.

There are two courses that are expected: the Trump administration may issue an order to delay the implementation of the fiduciary rule and have another regulation, an “interim rule” in its place. Or they could propose a delay but this would be tricky because for a rule that technically became effective last June, the administration is legally obligated under the Administrative Procedure Act to go through a public notice and comment period.

Last year, the Obama administration introduced the Fiduciary rule that requires financial advisers to always act in the best interest of their clients when handling their retirement savings. It was expected to be a big industry shakeup, making financial advice more reliable, compensating advisers with a flat-fee model and reasonable compensations, incentivizing them to really act on their client’s best interest as opposed to their own personal gain. The DOL’s Fiduciary rule was aimed at stopping the $17 billion a year that gets wasted in exorbitant fees.

The banks and Wall Street have continued to oppose this rule on grounds of lengthy paperwork and compliance expenses. Financial firms were anxious that once the rule is in effect, they will not be able to make as much money. Republicans have expressed that repealing this rule is on their agenda. Now with Trump as the President elect, and Republicans holding majority in both Houses, there is a fear that legislative action will be taken to kill the much-needed Fiduciary rule.

Joseph Peiffer of PIABA (Public Investors Arbitration Bar Association) was quoted in the InvestmentNews, “If he (Trump) wins, no one knows what the hell is going to happen.” Now that Trump has won, the fate of the rule hangs in the balance. There are others who think that the rule is here to stay, inspite of the unpredictability.

This week, it has been reported that the Department of Labor proposed tougher laws after issuing new regulations requiring financial advisors and brokers managing 401k and retirement accounts to act in the best interest of their clients. These rules were proposed a year ago and after deliberating on it for a year, the White House has finalized these tougher requirements. However, it might be a year before these rules go into effect.

An academic study commissioned by the White House revealed that “conflicts of interest” in financial investing was costing Americans about $17 billion a year in retirement savings. Although brokers are required to only recommend “suitable” investments under the current “suitability standard”, they can push a more expensive product that pays a higher commission than a cheaper fund that would be equally appropriate for that investor.

The new rule fiduciary rule is aimed to at reducing fees and commissions that erode retirement savings and hold brokers to higher standards. It will cast a wider net on who is subject to the fiduciary standard.

This week, the attorneys at Malecki Law sent letters to several United States Senate and House of Representatives members, urging them to support the Department of Labor’s (DOL) proposal to hold financial advisors to a higher standard and act in the best interest of retirement investors. These members of the Congress include the Honorable Charles E. Schumer, the Honorable Jerrold Nadler, and the Honorable Kirsten E. Gillibrand.

Millions of Americans have worked their whole life to build a retirement nest egg and count on their retirement savings to support them through their golden years. The DOL’s proposal addresses loopholes in the current rules that make it far too easy for some advisers to take advantage of these hard-working Americans and line their own pockets with retirement savings. Our system is so broken that brokers often can and do put their own interest in commissions above the interests of their clients, causing them to be in unsuitable products just so the broker could earn additional commissions.

When someone turns their life savings over to someone for advice, they believe their financial adviser is going to do what’s best for them.  We have never heard a client recount a story of a financial advisor that told them that they are not fiduciaries, in fact, we hear just the opposite.  We all see the advertisements on television that say the financial advisers are there to help us, but we need to know that financial advisers are obligated to put client interests first, as well as be able to receive that assurance in writing.