En español | The Department of Labor says it won’t further delay a federal rule that requires financial advisers to make the interests of their clients the top priority when providing retirement advice.
This so-called fiduciary rule took effect last year, but financial professionals had until April 10 to comply. President Trump in February asked the Labor Department to review the rule, which postponed the compliance date until June 9.
In an op-ed in the Wall Street Journal today, Labor Secretary Alexander Acosta says the agency found that it has no legal basis to change the deadline.
AARP and other consumer advocates support the fiduciary rule, arguing that investor retirement accounts such as 401(k)s and IRAs have been shortchanged by hidden fees and commissions. A 2015 report by the White House Council of Economic Advisers found that these fees cost IRA investors alone $17 billion a year.
“Many advisers already meet a fiduciary standard, and many more firms, agents and brokers have spent considerable time and money complying with the fiduciary rule,” says Nancy LeaMond, AARP executive vice president. “All retirement investment advisers should meet this standard.”
“It’s a big win for the American consumer,” says Scott Puritz, managing director of Rebalance IRA, a Maryland investment management firm that acts as a fiduciary for its clients.
Registered investment advisers already must adhere to a fiduciary standard of putting the interest of their clients before their own. But brokers have had only to make sure their recommended investments are “suitable” based on a client’s age and risk tolerance — a much lower standard set by the security industry’s self-governing body. These “suitable” investments can include higher commissions and fees.
“Although courts have upheld this rule as consistent with Congress’s delegated authority, the fiduciary rule as written may not align with President Trump’s deregulatory goals,” writes Acosta in the Journal. “This administration presumes that Americans can be trusted to decide for themselves.” However, the Labor Department plans to continue to gather public comments on the rule.
The financial industry largely opposes the rule, saying that advisers might have to charge more for their services. That would make professional advice unaffordable to small investors, advisers say.