It remains unclear whether President Trump would sign such legislation into law. This year, one day before the rules went into effect, the House of Representatives passed a bill that would scrap them. Last year, Congress voted to overturn these DOL regulations, but President Obama vetoed the legislation. For example, a fee of 1 percent over a period 40 years could result in the loss of hundreds of thousands dollars to the client.ĭespite going into partial effect, the future of the rules is far from set in stone. Some also argue that it is impossible for fee-only advisers to give conflict-free advice, and that the required fees charged are enormous when compounding interest is factored in. Chamber of Commerce have filed lawsuits on similar grounds. The National Association for Fixed Annuities and U.S. Annuity carriers argue that the rule and resulting decrease in annuity sales will adversely impact investors who benefit from the guaranteed lifetime income that annuities offer. Industry players are also worried that the high cost associated with disclosure requirements will decrease the sale of annuities, an important investment tool in retirement accounts. However, a Goldman Sachs report estimates that complying with the new rules will cost $13 billion initially and more than $7 billion annually. The rationale is that this operating standard would prevent broker-dealers from steering client funds toward retirement securities with higher fees and lower returns, a practice that the Obama Administration estimated costs investor $17 billion dollars a year. In their current form, the rules require financial planners and investment brokers who handle retirement savings accounts to operate using a fiduciary standard. According to White House Press Secretary Sean Spicer, the regulation represented “exactly the kind of government regulatory overreach the president was put in office to stop.” However, Trump-appointed Secretary of Labor Alexander Acosta allowed the rules to go into partial effect on June 9. The rule, which was drafted during the Obama Administration and initially scheduled to go into effect at the beginning of the year, was delayed by the incoming Trump Administration for further review. ![]() ![]() ![]() Department of Labor (DOL) regulation ( ) reforming fiduciary requirements went into effect. In contrast to a fiduciary standard, a suitability standard only requires broker-dealers to make “suitable” recommendations to their clients, allowing them to avoid having to place their interests below their clients' interests.įederal Action Earlier this month, a U.S. Instead, these broker-dealers operate based on a suitability standard. While many investment firms require their investment advisers to operate under fiduciary duties rules, many broker-dealers who also manage accounts like retirement savings accounts are exempt. ![]() A fiduciary duty imparts the highest degree of legal responsibility on financial planners by requiring them to set aside personal or company interests in favor of their clients’ interests. States are reacting to uncertainty surrounding recent federal regulations on the standard of care financial planners use for their clients' accounts by passing state based rules.
0 Comments
Leave a Reply. |