President Trump has many in the industry on the edge of their seats, waiting to see if he'll act to stop the fiduciary rule from going into effect. Trump's made moves to rollback regulations, but has yet to touch the Department of Labor's controversial regulation. He's never spoken publicly about it, but anticipation is mounting after top executives at Raymond James and UBS said during earnings calls that the rule looks likely to be delayed.
Here's what could happen to the rule, and what major firms are actually doing in the face uncertainty over its future.
The new administration has at least two ways to roll back the rule: the Republican-controlled Congress can pass a bill to slash it. Earlier this month, Rep. Joe Wilson (R-S.C.) introduced legislation to delay the implementation of the rule. Industry insiders anticipate Trump would sign such a bill if it reached his desk. In the second scenario, the Department of Labor under the Trump administration can delay the rule and craft a replacement.
U.S. President-elect Donald Trump speaks during the Chairman's Global Dinner at the Andrew W. Mellon Auditorium in Washington, D.C., U.S., on Tuesday, Jan. 17, 2017. Trump stated that he has "great respect for your countries' while addressing nearly 150 diplomats and foreign ambassadors at the event. Photographer: Kevin Dietsch/Pool via Bloomberg
Kevin Dietsch/Bloomberg
There is also a pending lawsuit seeking to overturn the regulation. A judge has yet to rule in that case, which was brought by several trade groups, including FSI, SIFMA and the U.S. Chamber of Commerce.
Fiduciary advocates, however, are prepared for a prolonged fight over the rule’s fate. Consumer advocates have argued that the discrepancy between the industry’s claims in a lawsuit seeking to overturn the rule and the manner in which firms advertise their brokers displays the urgent need for a fiduciary rule. Even if the Trump administration delays or repeals the rule, fiduciary advocates won’t give up the fight, according to Barbara Roper, the director of investor protection at the Consumer Federation of America.
FINRA CEO Robert Cook recently said that if the rule is overturned, the SEC and FINRA could fill in the regulatory gap. Cook said the SEC would be the most appropriate agency to implement a new regulatory standard. And FINRA would hope to play a constructive role in that process, he said.
The SEC has been authorized to craft its own fiduciary standard under the 2010 Dodd-Frank Act. However, the regulator has yet to act.
John Taft, retired CEO of RBC Wealth Management-U.S, thinks the right solution should come from the SEC, instead of the Labor Department. He said the SEC better understands how financial markets work. The commission already has the authority to implement a fiduciary standard that applies to all client accounts — not just retirement accounts.
However, despite uncertainty surrounding the rule's fate, Morgan Stanley has moved ahead with client-friendly changes designed to comply with the regulation. The wirehouse, which has more than 15,000 advisers, plans to lower commissions for trades involving stocks and ETFs.
And Advisor Group, an IBD with over 5,000 advisers, also announced a series of changes to better position the firm to compete under the new regulatory framework. The company cut fees, simplified its platform and launched new educational resources for advisers. The shifts reflect a “strategic inflection point” for the firm, says Executive Chairwoman Valerie Brown.
Bank broker-dealers are also making adjustments to their business models in an effort to comply with the rule. J.P. Morgan Chase and Capital One, for example, announced plans that they will drop commission-based retirement accounts.
The bulk of the haul came from the bankrupt crypto company Terraform Labs. But Morgan Stanley, LPL Financial, Ameriprise and other big firms also came under scrutiny.
President-elect Donald Trump's second administration signals the need for empathy and steps to protect estates or consider moving to a new state, advisors say.
The founder of Mitlin Financial said he has enjoyed the transition away from paper documents, traditional business cards and choosing each piece of his technology stack.
