PLANADVISER - May/June 2018 - 2

editor's letter
What's Next?
A
nother day, another turn of the fiduciary rulemaking world where confusion and
speculation abound. We've been talking about the adviser conflict of interest debate
for years-through multiple administrations-and it seems destined to continue
down its long and winding road.
The saga is almost too complicated to follow. Many expected the Department of Labor
(DOL) fiduciary rule to be delayed or otherwise negated by the Trump administration,
but Secretary of Labor Alexander Acosta, early on, released a letter saying there was
" no principled legal basis " to delay the rule, and so part of it went into effect, while the
second half, relating to the best interest contract and its exemptions, was, at a later date,
delayed until 2019. Despite multiple efforts by Congress to enact some sort of legislation
to put an end to the rule, nothing ever passed both chambers and made it to the executive
branch.
All the while, legal challenges against the rule made their way through a few different
venues. The most significant case, it turns out, was that being heard in the 5th Circuit,
which, in March, determined that the DOL had severely overreached with the rule, sounding
what many said was its death knell. California, New York and Oregon's attorneys general,
alongside the AARP, have tried to intervene and resurrect the case. Though they have been
rejected once, as I write this, they are still trying to get the court to reconsider, and the
5th Circuit has not yet officially vacated the rule. At this stage, the DOL says it expects the
court to soon issue a mandate " effectuating its opinion vacating the entire fiduciary rule,
the [best interest contract] exemption, the principal transactions exemption and related
amendments to existing PTEs [prohibited transaction exemptions]. "
Last week, a letter was sent by five Senate Democrats to the DOL trying to determine
how the regulator would approach the fiduciary rule since the 5th Circuit decision. But I
doubt much should be expected to come of their initiative.
Where do all these machinations leave us? I joked last week that this constant back and
forth reminds me of a scene from " Monty Python and the Holy Grail. " In it, a man tries to
offload an apparent corpse to the Dead Collector. While the man tries to obtain his money,
the " dead man " tells them, " I'm not dead! " After a few exchanges, the Dead Collector knocks
the man down with a club, seeming to " solve " the problem. (I get that this sounds terrible as
I write it, but in the whole Monty Python movie context, it is actually amusing.)
I feel like that's kind of where we are with the fiduciary rule. It's not quite dead, but it
looks dead, and it might not take much more to officially return us to the " old " five-part
test. However, as an industry, we unlikely can really return to that state, in all practicality.
There is a heightened awareness of what it means to be a fiduciary, and clients demanding
that their adviser keep their interest at heart shouldn't be surprising.
As advisers tell it, part of the challenge with the rule being in limbo is there is no
longer an exemption available for those fiduciaries that give advice and receive increased
compensation as a result, potentially creating a prohibited transaction. The DOL has put
out guidance in a Field Assistance Bulletin (FAB) about its continued temporary enforcement
policy, and is expected to release some sort of exemption in the future.
To add to the confusion, that exemption may have to also consider what's happening
elsewhere in the capital-at the Securities and Exchange Commission (SEC). At both the
SEC and FINRA, discussions and proposals are already underway about working in clients'
best interest.
The situation is still " Hazy, " to cite the Magic 8-Ball, and it won't become much clearer
anytime soon, even after the 5th Circuit issues its mandate. With new regulatory bodies
weighing in, and many providers and advisory firms having invested in technology to
comply with a rule that was going into effect-and did, in part-each person and group
will have to find its own approach to navigating the rule ... for now.
-Alison Cooke Mintzer, Editor-in-Chief, PLANADVISER
That's kind
of where we
are with the
fiduciary rule.
It's not quite
dead, but it
looks dead,
and it might
not take
much more to
officially return
us to the " old "
five-part test.
2 | planadviser.com may-june 2018

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PLANADVISER - May/June 2018

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