New consumer protections requiring financial advisers to put their customers’ interests ahead of their own — at least when handling their retirement money — will take effect next month, putting to rest the question of whether they would be delayed further.
The fate of the so-called fiduciary rule, created under the Obama administration, was called into doubt when President Trump signed an executive order seeking a review of it, prompting regulators to delay its implementation to June from April. On Tuesday, Alexander Acosta, the Labor Department secretary, said the basic principles of the rule would indeed take effect on June 9, even as his agency continues to review its finer details.
After careful review, the Labor Department has “found no principled legal basis to change the June 9 date while we seek public input,” Mr. Acosta wrote in an opinion piece published Monday in The Wall Street Journal. “Respect for the rule of law leads us to the conclusion that this date cannot be postponed.”
Retirement Investors Aren’t Safe Yet
Mr. Acosta has made no arguments against the rule that didn’t come up in the original debate or in court cases against it. The industry’s concerns — including a claim that acting in a client’s best interest would be unduly burdensome for advisers — have all been considered and were either incorporated into the final rule or rebutted. The courts have said the rule deserves to stand.
Instead, Mr. Acosta objected that the rule “as written may not align with President Trump’s deregulatory goals.”
That is striking. Mr. Acosta’s job as labor secretary is to advise Mr. Trump on how to help working people, not how to achieve his deregulatory goals. The fiduciary rule, as written, will help working people. Rescinding it will not.
Now, Financial Advisers Will Have to Put You First (Sometimes)
When a doctor prescribes a drug, most people trust that it is the best course of treatment. The next time you seek financial advice, those professionals will be required to act in a way that approximates the patient-doctor relationship. But many investors will still remain vulnerable.
The fiduciary rule — which was created under the Obama administration and has, for now, survived efforts to quash it — takes partial effect on Friday. That means all types of financial advisers, including brokers and insurance agents, must put their customers’ interests ahead of their own financial motives, at least when handling customers’ retirement accounts.
While the new rule strengthens consumer protections, there are large gaps in what it actually covers. And nothing in the rule requires professionals who call themselves wealth managers or financial advisers to advertise the fact that they may only be licensed to sell a product — and have little training or education in genuine financial planning.
The rule as written also continues to be challenged. House Republicans approved a bill on Thursday to eliminate it, though that bill faces trouble in the Senate. And it is being reviewed by the new leadership at the Department of Labor, which oversees retirement accounts. The fiduciary rule could still change, or be weakened, before it takes full effect in January.
