The re-release of the Department of Labor’s fiduciary rules will be delayed until August so that Labor Secretary Thomas Perez can work closely with both sides of the political aisle to come up with new fiduciary rules to govern the financial advisors who work within the retirement space. The original release date for the rules was in the spring.
The department announced the delay late last month. The sticking point on the fiduciary rules is that, for the first time, brokers who sell IRAs would have to follow the same investment advice standards as registered investment advisors.
Industry insiders have argued that making brokers follow the same rules would increase their regulatory costs and drive these individuals out of the business of serving individuals with low- to moderate retirement assets.
Perez has been meeting with senators over the past month to try and bring them over to his way of thinking: that anyone who gives investment advice to retirees should be held to the same high standards.
Congress attempted to make it so the Department of Labor and Securities and Exchange Commission would have to work together to come up with a joint fiduciary standard by passing a bill in October stating that the DOL would have to wait to release its rules until after the SEC released its rules.
The 10 Senate Democrats who proposed the bill said in a letter to the Office of Management and Budget they were “concerned that uncoordinated efforts undertaken by the agencies could work at cross-purposes in a way that could limit investor access to education and increase costs for investors, most notably Main Street investors.”
President Barack Obama threatened to veto that bill, instead deferring to the two agencies to make their own decisions without allowing their actions to be dictated by legislation.
The Department of Labor initially proposed its fiduciary rule in 2010 but was met with industry and legislative resistance.
Assistant Secretary of Labor Phyllis Borzi has been a big supporter of the rules, saying that the industry was not doing enough to protect investors, but was instead offering advice that would earn them the most in fees and commissions.
The National Association of Insurance and Financial Advisors and other industry groups applauded the decision to delay the rules. NAIFA has been very vocal in its opposition to the fiduciary rules and their impact on financial advisors’ service to middle-market consumers.