401(k) advisors racing to understand and implement the DOL’s Conflict of Interest Rule (known colloquially as the 401k fiduciary rule) before the April deadline might want to slow it down.
Among the many surprises and uncertainty to come from Donald Trump’s victory is the possibility of a reversal before the bill is fully implemented.
“The long-term viability of the regulations is at least once again in play,” Andrew Oringer, co-chairman of law firm Dechert LLP, told The Wall Street Journal Wednesday. “You really have to wonder whether the new fiduciary regulations will survive this historic election.”
The paper added that Wall Street firms affected by the rule saw their stocks rise significantly on Wednesday, suggesting that Trump’s overall deregulation push will help those companies.
However, “It’s too soon to be dancing naked in the streets,” cautioned Kim O’Brien of those hoping for repeal.
O’Brien, former president of advocacy organization National Association for Fixed Annuities (NAFA)—itself embroiled in a lawsuit over the fiduciary rule’s implementation—and current vice chairman and CEO of Americans for Annuity Protection, said Trump essentially has three options.
The first is to freeze the rule upon assuming office. Although currently in the Federal Register, it won’t take effect until April. The law allows a newly elected president to stop such rules as long as it doesn’t involve Congress or affect public safety.
“The DOL’s action does neither, so he could do it,” she added.
The second is to allow the rule to be implemented and revise it afterwards. The third possibility is to allow the rule to be implemented and then fully repeal it.
“This is not a political statement, but I would be wary of promises in the first year of a presidency,” she warns when speaking of the possibility of the first option. “They become overwhelmed with other priorities, and this might not rate very highly.”
Regardless, firms should continue with their preparation for an eventual implementation of a fiduciary standard.
“It would be could to freeze it in place and repeal the current rule, and then develop on that is workable and manageable, which this one is not.”
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.
