Fiduciary Rule in Limbo, But Investors Are Still Winning
No matter what happens to the DOL conflict-of-interest rule, several changes have already kicked in, and that’s good news for retirement savers.


Among the flurry of directives flying out from the Trump administration in the first few weeks of his presidency was an order to delay the implementation of the Department of Labor’s fiduciary rule. The rule, which took nearly six years to materialize, was once again cast into uncertainty by the stroke of a pen. President Trump made it clear throughout his campaign and in the early days of his administration that he was no fan of what he considered to be burdensome regulations.
The DOL rule made the list of targeted regulations by virtue of some heavy lobbying by Wall Street friends as well as its close proximity to its April 10 implementation date. Instead of clarity on how they will be treated by financial advisers, retirement investors now face at least six months of confusion as the rule languishes in limbo.
Proponents: Investors Should Get the Standard of Care They Deserve
The fiduciary rule was considered to be a huge win for retirement investors as it finally lifted the veil on commission-based brokerage firms and advisers, forcing them to deal in the open regarding their inherent conflicts-of-interest and opaque system of compensation, fees and commissions. The rule requires any financial adviser to use a fiduciary standard of care when offering advice or recommending an investment product to retirement clients. That pretty much rules out selling commission-based products unless they were willing to seek a waiver from their clients allowing them to do so, but with complete transparency of all charges, fees and compensation.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Opponents: Too Costly, and it Hurts Small Investors
According to opponents, the DOL rule, combined with layers of ERISA requirements, would create a bureaucratic quagmire making it too costly to serve smaller investors, limiting their options for investment products and receiving advice. That is what caught the attention of the Trump administration, which believes the DOL, like other rule-making agencies in the federal government, has exceeded its authority. The directive has asked the DOL to review the rule and provide an updated economic and legal analysis, which is likely to tie everything up for months.
The Industry is Already Moving Forward
The impact of the rule on brokerage firms and commission-based advisers was significant, forcing them to choose between “operating in their clients’ best interests” and exiting the trillion-dollar retirement plan marketplace. Although brokerage firms vigorously fought the rule, many spent millions of dollars over the last year retrofitting their products and compensation structures to bring them in compliance.
Many of the big firms, such as Merrill Lynch, JPMorgan Chase and Capital One, have announced they would ban commissions on retirement accounts. In the other camp, firms like Morgan Stanley, Wells Fargo, Edward Jones and Raymond James have said they would instead be using the rule’s “best interest contract exemption,” or BICE. The exemption, which must be signed by both the adviser and the client, is an acknowledgement of the adviser’s role as a fiduciary while allowing for the charging of commissions. Proponents of the rule argue that BICE weakens the rule and allows commission-based advisers to operate under a veneer of a fiduciary standard.
Even Without the Rule, There’s No Going Back
The ultimate fate of the rule is unclear. The administration can’t simply rip it up, but they can put pressure on the DOL to revise or rescind it. It may also be trying to drag it out long enough for Congress to legislate it away. However, one thing is clear: The fiduciary rule and all of the attention it has been given over the past couple of years, has shaken up the advisory landscape. The real winners are financial advisers who already operate under a fiduciary standard of care. Regardless of what happens with the rule, investors are now much more aware of the differences between a fiduciary and a commission-based broker, and there will much more clarity in the marketplace.
Investors are winners as well. The genie has been let out of the bottle, and it will be hard for the firms to turn back. Some firms will continue to move forward to implement the spirit of the rule. Those firms choosing not to do so have been exposed and will need to take clear measures to implement a heightened standard of care or risk significant competitive disadvantages. The momentum gained over the last couple of years should continue to build toward greater transparency, more fee-based compensation and lower-cost products.
The financial services industry and the investors it serves might be better off with universal fiduciary standard of care handed down from Congress, the Securities and Exchange Commission or the DOL, but, ultimately, it will be the marketplace that brings about the change.
Woodring is founding partner of San Francisco Bay area Cypress Partners, a fee-only wealth consulting practice that provides personalized, comprehensive services that help retirees and busy professionals to enjoy life free of financial concern.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Woodring is founding partner of San Francisco Bay area Cypress Partners, a fee-only wealth consulting practice that provides personalized, comprehensive services that help retirees and busy professionals to enjoy life free of financial concern.
-
Dow Hits New Intraday High on Fed Day: Stock Market Today
Not even the most important stock in the world could keep the oldest equity index down on a significant day for markets.
-
Savings Goal Calculator
Tools Want to know how much you need to save each month to reach your financial goals? Our calculator helps you build a realistic savings plan.
-
Gray Divorce Can Throw Your Retirement a Curveball: What to Know
If you're entering retirement and going through a divorce at the same time, you've got some work to do to shore up your long-term financial security.
-
I'm a Real Estate Investing Expert: Optional 721 UPREIT DSTs Can Be the Best of Both Worlds
Before investing in any 721 UPREIT exchange, look for one that offers a straightforward, investor-friendly exit.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)
An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client Reviews
Financial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop Investments
Truck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams Now
Beyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on Retirement
While some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.