On January 20, 2017, Donald Trump will be sworn into office as the 45th president of the United States. It will be the final cap on top of what was arguably the most hotly debated election cycle in recent memory.
But the buzz didn’t stop once the results rolled in. Between cabinet pick announcements and endless speculation about the President-elect’s policy to-do list, the U.S. Department of Labor (DOL)’s investment fiduciary rule is back in the news again — but this time, it’s not the prospect of the rule, but its fate that is in question. Why?
The Word on the Street
Come next year, some suspect that the new administration will attempt to roll back the rule, which legally requires investment advisors that serve retirement plans to put their clients’ best interests first. The legislation is set for full implementation on January 1, 2018.
So are the prognosticators correct? Will the rule meet its demise? Unfortunately, no one can know for sure. Unwinding the rule, around 80 days before the compliance deadline, would be far from easy. The rule was already finalized as a DOL regulation last April, which means the new administration would have to embark on a rigorous process of public notice and commentary to make changes.
Moreover, Executive Action can’t undo the fiduciary rule, as the regulation’s effective date has already passed. These factors, along with a host of other implications, would complicate a potential overhaul of the regulation. Instead, other commenters expect that the administration might delay the rule for an extended period of time, during which they would revise the regulation and release a retooled version for implementation. But of course, that’s all just speculation.
The Important Question
Assumptions aside, what could a world without the fiduciary rule mean for your company’s retirement plan and its participants? As a registered investment advisor, our firm has always upheld the fiduciary standard of care, which means the only advice and recommendations we offer are those based on our clients’ best interest, values, priorities and goals. And that will never change, regardless of what lies ahead.
So what should you do? Whether the rule is implemented, delayed, amended or repealed, make sure that you:
1. Start the conversation.
Ask your advisor if he or she is a fiduciary. If the answer is no, ask why not?
2. Read the fine print.
Look into your advisor’s background, especially when it comes to how they are paid for their services.
If you have a long-standing relationship with your advisor, you may have to revisit your initial agreement. At the time, did your advisor fully disclose their compensation for the investments they recommended to you? Do they currently receive commissions for their recommendations? If so, will they stop accepting commissions, or will they comply with the Best Interest Contract (BIC) Exemption? Get answers to these questions immediately.
3. Take a second look.
When is the last time you reviewed your investment policy statement (IPS)? What fees are you paying? Are they competitive with other retirement plans in your industry? Benchmark your current offerings with the requirements laid out in the fiduciary rule.
Does your retirement plan need a check-up? LEARN MORE