Department of Labor Begins Implementation of Costly Fiduciary Rule

After a 60-day delay by President Trump’s executive order, the Obama-era Department of Labor Fiduciary Rule will partially be implemented today, June 9th. This Rule is going to greatly hinder the ability of financial managers to advise IRA and 401(K) holders, increase costs, and reduce investment opportunities for low-and-middle income investors. It is of great urgency that Labor Secretary Alexander Acosta work with his staff to remove, or permanently delay this disastrous rule.

Data indicate the Fiduciary Rule will disqualify up to 7 million IRA holders from investment expertise and reduce the number of IRA openings by 400,000 a year. Even with fewer accounts, firms will see their compliance burden increase by 60,000 paperwork hours and consumers will face an additional $46.6 billion in costs, or $813 annually per account. As Americans continue to retire at an unprecedented rate, the government should actively support policies that reduce the costs of saving for retirement, not the opposite.

Investment firms have stated that this Rule will simply shift their business model from a commission-based system to a fee-based system. Many consumers, however, view this fee-based model less favorably. Unfortunately, this Rule will harm those it was supposed to protect. When firms increase their price or choose to deal only with big money investors, lower and middle income investors will be priced out of the market.

Included in section 841 of the Financial CHOICE Act of 2017 is a complete repeal of the Fiduciary Rule. The CHOICE Act passed the House of Representatives yesterday and will hopefully be considered in the Senate Banking Committee soon. NTU strongly supports that this language remain in the final version of the bill and hopes this key legislation will be signed before the full implementation of the Rule on January 1st, 2018.