The Department of Labor announced that it will allow a Trump-era exemption for investment advice fiduciaries to move forward.
The exemption, “Improving Investment Advice for Worker & Retirees,” grants certain forms of compensation for fiduciary advice and will go into effect as scheduled on Feb. 16.
The DOL said that in the coming days, the agency will publish related guidance for retirement investors, employee benefit plans, and investment advice providers.
“This exemption allows for important investor protections, including a stringent ‘best interest’ standard of care for fiduciary recommendations of rollovers from ERISA-protected retirement accounts,” Deputy Assistant Secretary of Labor for the Employee Benefits Security Administration Ali Khawar said in a statement. “We recognize that investment advice providers have been preparing for the exemption, and this step will allow them to implement important system changes.”
Disappointment and delight
Preston Rutledge, former Labor Assistant Secretary for the Employee Benefits Security Administration was measured when asked for his reaction.
“This is an encouraging development that will provide a level of certainty to the regulated community,” he said in an email. “It’s an indication that the new administration will take a methodical and thoughtful approach as they review the recent EBSA guidance.
The American Retirement Association commended the decision, noting that the exemption “was intended to allow investment advice fiduciaries to offer a wide array of investment advice services in compliance with the Impartial Conduct Standards.”
“We are pleased that the Department of Labor has decided to proceed with the new exemption, which contains important protections for plan participants and certainty for plan advisors who want to work with those participants,” Brian Graff, CEO of the American Retirement Association, said. “We look forward to the opportunity to work with the Labor Department as they develop guidance and continue to improve this exemption in the months ahead.”
IRI also supported the decision.
“This will permit our member companies to continue to provide clients with valuable retirement products and services under robust consumer protections that ensure financial advice professionals act in their clients’ best interest,” Chief Legal and Regulatory Affairs Officer Jason Berkowitz wrote. “Our members are prepared to undertake the necessary hard work to implement the new exemption, which will require updating policies and procedures, modifying systems, training, and more.”
However, Barbara Roper, Director of Investor Protection, Consumer Federation of America, tweeted the following as part of a lengthy thread.
“The Department of Labor has announced it will allow its controversial advice rule to take effect as scheduled next Tuesday. While we did not support the rule’s adoption, we support that decision. While the rule may be better than nothing in the short term, this flawed rule must not be the stopping point for the Department’s efforts to better protect retirement savers from conflicted advice.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
