Last year, the U.S. Department of Labor unveiled a proposal that would extend a fiduciary standard to any persons who provide investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owner under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code, according to a release from the Labor Department. As we touched on recently, this proposed fiduciary rule has been the subject of contentious debate with opposition coming from many different arenas.
Last summer the Labor Department allowed the public to provide written comments on the proposed regulations and thousands of submissions poured in from individuals and organizations on the conflict of interest rule and related exemptions. Rumors have been circulating for quite some time that the Labor Department would respond to the various criticisms by unveiling an updated proposal for new fiduciary regulation. The wait appears to be over because Labor Secretary Thomas Perez is expected later today (11:30 a.m. at the Center for American Progress) to announce the final (revised) fiduciary rule. Secretary Perez told members of the House Education and Workforce Committee last month that the Labor Department listened to the overwhelming number of concerns raised during the comment period, and that he looked forward to “explaining the changes we made and how we intend to proceed.”
The regulation’s final details will of course be closely analyzed by brokerage firms, insurance companies, and other affected industries. There are already reports that some lawmakers are preparing to challenge the rule using the Congressional Review Act, and the American Council of Life Insurers is said to be making preparations to fight the rule in court. Regular retirement investors, though, may not even be aware of the fiduciary proposal, let alone the expected update, because even though this is the group that the proposal is intended to benefit, the whole fiduciary standard is a bit of a mystery for many Americans. At least that is what a new survey by Financial Engines suggests, with 41 percent of retail investors saying that they are not sure if their current advisor is a fiduciary or not, and only 18 percent reporting that they know what it means for a financial advisor to be a “fiduciary.”
**Update: A breakdown of the changes in the finalized fiduciary rule can be found here.**
Sources: U.S. DoL, WSJ, Politico, NAPA, ThinkAdvisor, Financial EnginesPost author: Charles Couch