Why the Fiduciary Rule for Retirement Savers Is Here to Stay

No matter what Trump does, big financial firms have already made the transition.

(Image credit: ©2016, Bastiaan Slabbers - All Rights Reserved)

In keeping with his deregulatory agenda, President Trump issued an executive order Feb. 3 delaying implementation of the fiduciary rule for brokers that offer financial advice to investors with retirement accounts. The rule was slated to go into practice April 10, but Trump ordered the Department of Labor to conduct further analysis. No matter what happens next, the financial services industry has made changes that will affect investors seeking advice about their IRAs and other retirement accounts.

Years in the making, the fiduciary rule was developed by the Department of Labor to address concerns that some securities brokers encouraged investors to roll their 401(k) plans into individual retirement accounts composed of high-cost or inappropriate investments. The fiduciary standard requires financial professionals to put their clients' interests above their own. Securities brokers adhere to a less stringent suitability rule. Investments they recommend must be suitable, given a client’s age and risk tolerance, but don’t have to be the lowest-cost alternative. Trump’s announcement was applauded by industry groups that opposed the rule. Critics, which include some securities industry groups, said the cost of compliance would discourage advisers from working with middle-income investors and those with small accounts.

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Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.