After years of delays and uncertainty, it now appears that the Department of Labor will officially unveil its revamped fiduciary standard in January, according to an update of the Office of Budget and Management's regulatory agenda.
The DOL's first effort to advance a uniform fiduciary standard across the financial services industry was made in October of 2010. It was withdrawn amid fierce financial-industry backlash.
The fiduciary rule, which the DOL is now calling the "Conflict of Interest Rule," would redefine the term fiduciary to more broadly include anyone giving investment advice to individual investors, IRA owners and retirement plans.
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"The amendment would take into account current practices of investment advisers, and the expectation of plan officials and participants, and IRA owners who receive investment advice, as well as changes that have occurred in the investment marketplace, and in the ways advisers are compensated that frequently subject advisers to harmful conflicts of interest," according to the updated agenda, published on the Office of Information and Regulatory Affairs' website.
Many industry watchers have expected the release of the rule in early 2015. They have also suggested that any new fiduciary standard will be subject to the scrutiny of several rounds of legislative hearings.
But resistance has been high. Addressing the 2014 SPARK Institute conference this fall, Steve Saxon, chairman of the Groom Law Group, said "a lot of people in Washington are working mighty hard to make sure that reg never gets done — including me."
Sexton said there is a reasonable chance any new rule will be hung up in hearings for the remainder of President Obama's second term.
Though no one will know what the rule will look like until January, Sexton said it will no doubt mean big changes.
"Representatives, brokers and agents could become conflicted whether they sell affiliate products or even unaffiliated products with different price structures," he said at the SPARK conference.
Industry leaders like Morgan Stanley and Fidelity Investments have come out strongly against the proposed new standard, arguing that low- and middle-income investors would be most affected, as brokerage firms would have to narrow access to financial advice to comply with a broader interpretation of "fiduciary."
The January release of the rule will come after no less than two rounds of comments from industry. In October, Labor Secretary Thomas Perez told reporters at the National Press Club that the DOL wants to "understand with granularity" stakeholders concerns with the effort to enforce a new fiduciary standard.
"We continue to reach out and listen to various stakeholders, and we continue to learn a lot from them," said Perez.
DOL Assistant Secretary Phyllis Borzi has repeatedly said the new rule will not prohibit commissions on IRAs and would include other exemptions addressing other forms of compensation.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
