A federal rule that would require financial brokers to put retirement savers’ interests ahead of their own will go into effect June 9 without further delay, Labor Secretary Alexander Acosta said Monday.
The controversial regulation, which is known as the fiduciary rule, was pushed back after President Trump signed a memo in February asking the department to reevaluate the rule and revise it if it would be harmful to investors. The rule was originally supposed to be implemented April 10.
In an op-ed for the Wall Street Journal that was published Monday night, Acosta said the department “found no principled legal basis” for delaying the rule any further. However, he said the department will still work to comply with the president’s request and continue to seek public
input about the rule and its potential impact on retirement savers until Jan. 1.
He noted that the department is required by law to seek public feedback before making any major changes to regulations, and added that the agency would move to change any rule that was found to “harm American workers and families.”
The fiduciary rule, which was more than six years in the making, aims to set higher standards for the advice brokers give to retirement savers. The regulation is meant to help cut down on conflicts of interest in retirement advice. The announcement that the rule will go into effect in a few weeks serves as a major win for advocates of the regulation, which has faced intense opposition from Wall Street firms and Republicans from the start.
“Secretary Acosta’s decision is a significant victory for middle-class Americans trying to save for their retirement,” Nancy LeaMond, executive vice president of the AARP, said in a statement. “These hard-working savers need and deserve investment advice that is in their best interest, not the interest of Wall Street.”
Consumer groups and Democrats in favor of the regulation say the rule could make it more difficult for brokers to recommend investments that could lead to a bigger payout for them, even when there may be better options for their clients. The Labor Department estimated under the Obama administration that such questionable advice is costing retirement savers about $17 billion a year.
However, some financial firms and industry groups say the approach may have the unintended consequence of limiting savers’ options if some brokers decide to eliminate some investments they fear will face more scrutiny under the rule.
Kenneth E. Bentsen, president and chief executive of the Securities Industry and Financial Markets Association, an industry trade group, said in a statement that he was glad Acosta will continue to evaluate the rule. “We hope that … they will conclude, as we believe the evidence clearly shows, that dramatic and fundamental changes are appropriate and necessary,” he said.
Parts of the regulation, such as the best interest standard, will be implemented June 9. But the Labor Department said it will not enforce the regulation until Jan. 1, 2018.
Many financial firms have already made adjustments to help them comply with the new standard. Over the past several months, brokerage firms have lowered fees, designed new mutual fund share classes with simpler fee structures and eliminated some commission-based retirement accounts.