The Department of Labor's fiduciary standard do-over represents a "middle ground" between the outright bans on conflicted payments seen in other countries and the lack of "meaningful" protections in the U.S.
That is the assessment offered in a White House aide's memo of the DOL's redraft of regulations it has been working to perfect for more than four years.
Written by President Obama's chair of the Council of Economic Advisors, the Jan. 13 memo makes the case for the redraft to other senior White House advisors.
Recommended For You
Other industrialized nations, it says, have undertaken more aggressive action, including the outright ban of commissions on all securities sales.
In 2013, the UK banned all commissions that fund providers give to advisors for recommending their products, as well as commissions that advisors charge on products they market to retail investors.
Advisors in the UK are limited to charging an investment fee, either as a percentage of the amount invested, a fixed-fee, or an hourly rate. Fees can vary on the level of service provided.
The primary argument the financial services industry has levied as the DOL has explored a new fiduciary standard is that, ultimately, lower-income workers and younger savers would be shut out from the advisory industry, as fee-based services on small accounts would be too expensive for those smaller investors.
But early evidence in the UK shows that "many retail investment advisors" continue to service low-balance accounts, according to the memo.
In Australia, commissions were also banned in 2013, and so were kickbacks to advisors of more than $300 (Australian) for recommending certain mutual funds.
New duties to act in the best interest of the customer were also enacted. The election of a conservative administration in Australia last year brought new measures to reduce fees advisors faced in light of the reforms, but no effort to roll back the ban on commissions.
The Netherlands, Belgium and Italy have also banned or restricted commissions, and Germany and France are considering doing as much, the memo noted.
While the DOL is not proposing a ban on commission structures, its new rule will require brokers adopt enhanced consumer protections, the memo said.
Specifically, the memo says the DOL will require all brokers to follow a "best interest standard," enact policies to mitigate conflicts of interest, and refrain from "certain self-dealing transactions."
The memo also says the DOL's proposal will subject the financial services industry to "enhanced enforcement" of the new standards.
The redraft, expected to reach the Office of Management and Budget any day now, still must go through a 90-day review by OMB. The DOL will seek public comment on the measure and has said it will conduct a hearing on it.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
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.
