When it comes to the fiduciary rule, advisers are no longer waiting for Godot.
By declining to delay the rule's June 9 implementation date a second time, Secretary of Labor Alexander Acosta dodged potential lawsuits from fiduciary advocates and ensured that an industry which has spent millions to prepare for implementation will finally get on with it.
Yet even then, it's not a total victory for the rule's supporters.
Secretary Acosta's message was carefully tailored to give something to both sides, industry observers say. Sticking with the implementation date pleased supporters, but the secretary ― who is overseeing a review of the regulation ― also nodded to opponents' critiques.
"Certainly, it is important to ensure that savers and retirees receive prudent investment advice, but doing so in a way that limits choice and benefits lawyers is not what this administration envisions," he wrote in an opinion article in the Wall Street Journal.
Some industry trade groups, such as SIFMA, took note of Acosta's critical tone.
"While we are disappointed that the Department of Labor has chosen not to further delay the rule until the department has completed a review of the entire rule's impact on investors, we appreciate Secretary Acosta's recognition of the rule's negative impact and his desire to seek public input," SIFMA said in a statement.
Attorney Michael Renetzky, co-chair of law firm Locke Lord’s corporate and transactional department, says it appears clear Acosta intentionally left room for further comments and revisions.
"In fact, it appears that he has left the door open to a possible repeal,” Renetzky says. "I take his opinion piece at face value. He seems to have concluded that he doesn’t have a basis to institute further delay. However, he hasn’t actually stepped back from the president’s directive to evaluate opportunity for revision or repeal."
Though some of the rule's provisions go into effect June 9, other aspects such as the best interest contract exemption are not implemented until January 2018. And the Labor Department could still opt to tweak the rule's language, particularly around the BIC, after completing its regulatory review.
"Once you get some of those key provisions in place, it's harder to take them away then it is to prevent them from being adopted," says Barbara Roper, director of consumer protection at the Consumer Federation of America. "But we have no illusions about what the industry's goal is here; they want a watered down rule that lets them call themselves fiduciaries without actually being fiduciaries."
Although the Labor Department may suggest amendments, it still faces tough legal hurdles.
"I expect the focus now will be on refinement to the rule with more public comment," Blaine Aikin, executive chairman of Fi360, says. "But the DoL spent six years meticulously building the rule and every development indicates the rule will go into effect largely intact. Companies will be adhering to the rule and when everyone moves forward it will be incredibly difficult to either kill or significantly modify the rule."
Fiduciary supporters, meanwhile, were elated at hearing it would not be delayed again.
"It's a positive thing if you believe that someone being a fiduciary is good for investors," says Paul Pagnato, who is co-founder of RIA PagnatoKarp in Reston, Virginia.
Jon Ten Haagen, who has an eponymously named firm in Huntington, New York, says he voted for Trump but supports a fiduciary standard. If you're in financial services "you should be obliged to follow this," he says. "Your client is your client, not your pocketbook."
Clients and other consumers stand to benefit, backers say.
"From a consumer perspective, this is a huge win," says Rob Foregger, co-founder of platform provider NextCapital.
Foregger also notes that the industry has diligently prepared to implement this new standard. "While the new fiduciary rule is not perfect, it does help us take a giant step in the right direction," he says.
Opponents, however, lamented Acosta's decision.
The Insured Retirement Institute said the regulation "is already having harmful impacts on Americans planning for retirement," adding that it is "very disappointed that the entire rule will not be further delayed so a full examination of the rule can be conducted, as directed by President Trump, before it goes into effect."
The fiduciary rule, first proposed in 2010 and again in 2015, went through several revisions and lengthy public comment periods. There were days-long hearings attended by investor advocates, industry trade groups, attorneys and CEOs of brokerage firms. The rule also survived multiple lawsuits. Its history now stretches across the administrations of two presidents and three secretaries of labor.
After all that, Acosta's message to the industry is "the starting pistol for final preparations" ahead of the implementation date, Renetzky says.
With additional reporting from Tobias Salinger, Charlies Paikert and Suleman Din.
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