Tens of millions of retirement savers will soon face noticeable changes to investment services available to them under the Department of Labor’s fiduciary rule, which becomes effective in a little more than a month.

The rule basically requires financial advisors to put their clients’ best interests ahead of their own profits. The rule is set to become effective on April 10, but the department has proposed a delay in the rule’s implementation for a two month comment period.

Financial services firms that serve these clients have been working diligently to comply with this highly complex rule by its original deadline, notwithstanding the industry’s well documented concerns about its negative consequences for investors. 

The Trump Administration has asked the Department of Labor to conduct a new study of the rule to better understand how it might impact investors’ choice and opportunities, increase costs and increase unnecessary litigation risk.

In response to the President’s request, the Department has stated that the rule could undergo major changes and further has proposed a delay of the rule’s applicability date. They should approve the delay immediately.

We are at a critical juncture. In order to be compliant with the rule, financial services firms must provide notice to their clients in millions of households, of the various changes that will be made to their services agreements and accounts as required by the rule. This notice will be sent before changes are made.

Retirement investors are set to receive a range of messages from firms of the changes that will be made to their accounts services a result of the rule – these changes will include limitation or elimination of commission based IRAs, limited or eliminated access to certain products in IRAs such as mutual funds, limitation on access to advice from a financial advisor, limitation on web based financial education tools, and in some cases, elimination of the account altogether and the need to transfer the account to another provider.

If, subsequently, the Department decides to significantly alter the rule, as has been suggested, such changes may be unnecessary and clients will have to be re-informed, causing massive confusion. This is completely unnecessary.

We believe the Administration is correct to take another look at the rule. We believe in a best interest standard for brokers providing retail financial advice but that the DOL rule is not the best way to accomplish the task.

Now that the Department has proposed a delay it should proceed immediately, to avoid further disruption and confusion. And it should take the time to take a fresh look at the underlying rule. To do otherwise would not be in the best interest of clients.


Commentary by Kenneth E. Bentsen, Jr., SIFMA President and CEO.

Article Created by CNBC March 15 2017