Trump Delays DOL Rule: What You Need To Know
Back in 2015, former President Obama called on the Department of Labor (DOL) to update certain regulations regarding the financial services industry. The end result was a new rule largely known as the “DOL Fiduciary Rule.” To put it very simply, this rule requires all financial advisors to act in the best interests of their clients when giving advice on retirement accounts.
The new rule was intended to go into effect on April 10 of this year. However, on February 3, 2017, President Trump decided to delay implementation of the rule by 180 days. In addition, the president instructed the DOL to “conduct a new economic and legal analysis to determine whether the rule is likely to harm investors.” 1 It’s uncertain what will happen next, but many pundits believe the Trump administration will eventually scrap the rule entirely.
Let’s forget the politics for a moment and discuss exactly what the rule was supposed to do.
SUITABILITY VS FIDUCIARY
I mentioned above how the Fiduciary Rule would have required all advisors to act in the best interests of their clients when giving advice on retirement accounts.
“Now, wait a minute!” you’re probably thinking. “Are you saying advisors didn’t already have to act in their clients’ best interests?”
The answer is: Yes. Traditionally, most advisors are not required to put their clients’ interests first. Instead, advisors are required to follow a simple suitability standard. This means they are only expected to make recommendations that are considered “suitable” for their clients. To put it bluntly, this allows advisors to give advice that is primarily in his or her best interest, and not the client’s best interest, as long as that advice can still technically be considered “suitable.”
But there’s another, higher standard that some advisors hold to. It’s called the fiduciary standard. Advisors who are fiduciaries must put their clients’ interests before their own. Even if the advice an advisor gives is less good for the advisor, they must give it if that’s what is best for the clients they serve.
Under the Fiduciary Rule, any financial advisor providing advice pertaining to retirement savings, qualified plans, or IRAs would have been classified as a fiduciary.2 That meant many advisors who previously followed the “suitability standard” would have had to make a major change in how they do business.
It’s an open debate as to whether the Fiduciary Rule would have been good for investors or not. Proponents thought it would “protect retirees from conflicted advice that leads to inappropriate high-fee investment products that erode savings.”1 Detractors said it would be harmful, because it would make it harder and more costly for retirees with fewer assets to get qualified advice. Who’s right? We’ll probably never know.
One thing, however, is certain. Neither the rule itself nor the scrapping of that rule will affect you or me in the slightest.
You see, we at Bowers Advisory Group, LLC have been following the fiduciary standard for years. We’ve always put our clients’ best interests first. There are three reasons for this. One, because we know the only way we can be successful is if you are successful. Second, because our greatest passion is helping people work toward their financial goals, and we believe acting as fiduciaries is the best way to do it.
Third, and most importantly, we’ve always acted as fiduciaries because we believe it’s just the right thing to do.
So for us, it’s business as usual. President Trump’s decision to delay the rule will not impact how we take care of your retirement accounts. And if the rule does eventually go into effect? That won’t impact us, either.
Of course, if you have any questions about the fiduciary standard or the president’s recent announcement, please don’t hesitate to let me know. In the meantime, we’ll keep doing what we’ve always done: leaving no stone unturned in our effort to help you work toward your financial goals.
On behalf of all of us here at Bowers Advisory Group, LLC, thank you for being such a valued client or prospective client.
Please let us know if there’s ever anything we can do for you.
1 Mark Schoeff Jr., “DOL fiduciary rule delayed 180 days by Trump directive,” InvestmentNews, February 3, 2017. http://www.investmentnews.com/article/20170203/FREE/170209958
2 Mark Cussen, “Proposed DoL Rules: How They’ll Impact Financial Advisors,” Investopedia, http://www.investopedia.com/articles/financial-advisors/111615/proposed-...