The Obama administration enacted the rule last year to keep brokers from pitching only securities and funds that paid them high commissions and fees.
The rule may be doomed regardless of what happens in the courts. In February, the Trump administration directed the DOL to delay the rule’s scheduled April implementation, a move expected to be finalized soon.
Most brokers and dealers who handle employment-based retirement funds such as 401(k)s already meet the fiduciary standard, not a less-stringent “suitability” standard that only requires recommendations to fit a client’s general needs and risk tolerance.
However, the fiduciary rule imposes new paperwork requirements on all brokers. Critics contend that will create disincentives for brokers to offer advice to individual investors. It will affect employees who seek outside advice on rolling over retirement plan assets into another investment vehicle, such as individual retirement accounts.
The U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and several other business groups on Feb. 24 asked the 5th Circuit Court of Appeals to set aside a ruling by a federal court in Texas that the DOL acted within its statutory authority under the Employee Retirement Income Security Act when it promulgated the rule.
Advice: Keep in touch with your retirement plan administrator to monitor the fiduciary rule’s effect on your plan.