Can Trump Stop Obama's "Fiduciary Rule"?
It’s not taking the new White House very long to learn how big government — no matter its intention — seems to ruin almost everything it touches.
Consider the fate of the so-called “fiduciary rule.” The controversial Obama-era regulation was intended to protect retirement investors by requiring investment advisors always to act in the best interests of their clients. In practice, however, the rule would deny middle-class Americans sensible investment and retirement advice by saddling financial services firms with untenable regulatory compliance costs.
Only days in to his administration, President Trump ordered the Department of Labor (DOL) to review the rule. Small and mid-sized businesses within the order’s crosshairs assumed that the president’s action would result, at the very least, in a delay of the fiduciary rule’s April 10 applicability date, if not its outright replacement. But then the gears of big government began to grind.
When the president inked the executive order in the early days February there were only 66 days until the rule took effect, barring administrative action to delay or replace. Yet, in spite of the fast-ticking clock, it took a whopping 43 days for bureaucrats in the DOL and the Office and Management and Budget (OMB) to initiate the initial review process. Now fewer than 20 days remain.
To be fair, some of the initial steps in this process have statutory timelines, such as the public comment period that ended over a week ago. But the process of writing, reviewing, and publishing a final rule in the federal register does not; government can move at any pace it likes.
To delay the applicability date of the fiduciary rule — and the red tape it would drape over the retirement advisors and their clients — the federal government would have to complete the entire process before April 10. At its current pace, that’s increasingly unlikely, though not yet beyond the realm of the possible. Expedited action by both the DOL and the OMB is needed.
More specifically, the DOL would need to have completed authoring the rule and the OMB would need to have reviewed it by April 5th. (That date is not statutorily obligated, but instead what’s required to delay the rule’s applicability date.) That would leave just five days for OMB to transmit the final, approved rule back to DOL for publishing in the federal register.
What, exactly, would happen if bureaucrats continue slow-walking the review process and fail to craft a new delay rule before April 10? We don’t have to speculate, thanks to similar regulations adopted in the United Kingdom, which banned financial advisors from charging commissions in 2013.
One study found that after the regulation was adopted, the number of investment firms requiring portfolios in excess of $142,000 had more than doubled by 2015. As a result, a majority of so-called mass-market savers — e.g., those whose portfolios weren’t especially robust, including most middle-class families — were orphaned, left without advice. Why? Because financial firms adjusted their business models in light of the regulation, resulting in exorbitant fees that most families couldn’t afford.
It’s only a matter of weeks before a similar fate befalls American investors. To avoid that outcome, Washington’s bureaucrats will have to work efficiently — what a novel concept.
David Williams is the president of the Taxpayers Protection Alliance.