Donald Trump’s win could bring a major victory to brokers and financial advisers.
One of Trump’s campaign advisers, Anthony Scaramucci, has said that the president-elect would move to “repeal” an Obama administration rule that would protect retirement savers from conflicted advice. The rule, which would require financial professionals to put their clients’ interests ahead of their own, has long been a target of Republicans and other critics who call it burdensome and costly.
The changes are meant to protect mom and pop investors by improving disclosures and preventing conflicts of interests, which the White House estimates cost savers $17 billion a year. But the rule, which is set to go into effect April 10, has already faced multiple challenges in court.
Many firms would welcome the chance to stick with the status quo if the regulation is eliminated, says Michael Wong, an investment services analyst for the fund research firm Morningstar. Opponents have argued that the rule could make it difficult for brokers to work with certain customers, including those with smaller account balances.
Still, some companies also stand to benefit from the rule, which has motivated them to move some clients into fee-based accounts, where costs add up to a percentage of the assets invested, Wong says. Those can be more lucrative — and come under less scrutiny — than commission-based accounts, where advisers are paid based on the type of product they sell.
The reversal of the fiduciary rule could also cause confusion, Wong says. Some firms that have already made adjustments, such as lowering fees or moving people into different accounts, would now have to tell customers that the rule isn’t happening. “They’re going to have to potentially do a turnaround or send mixed messages to their clients,” he says.