2 | planadviser.com may–june 2017
editor’s letter
No more kicking the fiduciary rule implementation can down the road for the Department of Labor (DOL). The fiduciary rule is here and in effect ... for now. On the
morning of May 24, as I started to make sense of my email,
I noticed one from the DOL and saw a news alert about the
fiduciary rule. Turns out Secretary of Labor R. Alexander
Acosta had written an op-ed about the status of the rule,
and at the same time the DOL had released a set of FAQ
[frequently asked questions] and a field assistance bulletin
about it.
Based on the headlines I had just seen, I knew the rule
would go into effect on June 9—its delayed date—but I didn’t
know the logic behind the DOL taking no action to delay
it further. After all, the rule has been disparaged multiple
times by folks associated with the administration, so I had
expected to see some delay attempt. I was curious about
what drove the decision to let it stand.
Therefore, I read the op-ed with interest (who in our
industry didn’t?), and I was struck by the tone of the
piece. Secretary Acosta didn’t write that those in the DOL
had considered the reams of comments that had come in,
over the course of many, many years. Nor did he weigh
the pros and cons of the rule from the perspective of the
administration.
In fact, it was clear that the administration was not
particularly in favor of the rule, with Acosta’s comments
including: “This administration presumes that Americans
can be trusted to decide for themselves what is best for
them,” and “Americans should be trusted to exercise indi-
vidual choice and freedom of contract.”
However, Acosta said, “We have carefully considered the
record in this case and have found no principled legal basis
to change the June 9 date while we seek public input. Respect
for the rule of law leads us to the conclusion that this date
cannot be postponed.” The fiduciary rule is, as Acosta writes,
“the rule of law,” and therefore it is in effect at least until the
administration figures out a plan to rewrite it.
All of those in the industry who were banking on the
rule being undone were left with little time to get their
house in order. Responses from industry groups have generally voiced frustration that, after so many in the administration and Congress indicated that stopping the rule was
a priority, somehow at least parts of it would go into effect.
But the many Americans who wrote in to the department
in favor of disclosure and unbiased advice are unlikely to
share the frustration.
There is still time for them to change the parts of the
rule still pending until January 2018, so we can anticipate
some revisions to the prohibited transaction exemptions
not yet in effect—although some changes to current prohib-
ited transaction exemptions are part of the June 9 effec-
tive date. And, yes, already some sections of the rule were
stripped out when the administration delayed the enact-
ment in April, most notably the need to declare fiduciary
status to clients or to disclose specific conflicts of interest.
Many times, industry reforms have continued regardless
of whether rulemaking happened. For instance, the plastics
industry found the endocrine-disrupting chemical Bisphenol
A (BPA) under attack, not from the Environmental Protection
Agency (EPA), the Food and Drug Administration (FDA) or
any other federal agency, but from mothers who refused to
buy baby bottles or baby toys that contained the controversial plastic additive. As a result, you are now hard-pressed
to find any mainstream baby product company that does
not advertise their plastic toys, bottles or cups as BPA-free.
Manufacturers also started replacing the chemical in canned
food liners and food storage containers, once word got out it
was there. These companies weren’t forced to by law but did
it simply to be competitive and to remain in the market.
I bring up this example to say, while Acosta’s letter
seems to clearly suggest that the administration may move
to undo the rule, such action might not undo the spirit of
disclosure that accompanies it. Once providers, broker/
dealers (B/Ds), investment managers and the like have
spent countless hours and dollars coming into compliance,
it is unlikely they will expend the same to reverse course.
The expanded definition of “fiduciary” is likely here to stay.
Further, the overall awareness of fiduciary status might
mean clients wanting more in the way of disclosures than
is required. Advisers should be prepared.
Alison Cooke Mintzer, Editor-in-Chief
Kicking the Can
The fiduciary rule is, as Acosta
writes “the rule of law,” and
therefore it is in effect…at least until
the administration figures out a
plan to rewrite it.