An update on the DOL’s Fiduciary Rule


The upcoming Department of Labor’s (DOL) fiduciary rule has been all anyone’s been talking about, (if they’re not talking about Social Security, that is).

To recap, according to the current proposal, financial professionals will be legally obligated to disclose any fees and/or conflicts of interest associated with investments products they recommend for their clients.

The Obama administration is staunchly supportive of the rule, which purports to protect investors from hidden plan fees that may benefit the advisor more than the client. Apart from the Obama administration, a handful of advocates inside and outside of Washington have also pushed for the measure.

Several recent developments could potentially derail the progress that supporters have worked so hard to achieve. Democrats, Republicans, and members of the financial services industry who are opposed to the rule contend that it will be too restrictive and inhibit advisors from providing quality financial counsel. To that end, several alternatives have been raised.

Four members of the House have created a bill formed on “legislative principals” that would essentially replace the DOL’s proposal. Their intent was to create regulations that would protect investors without restricting advisors. If passed, the bill would likely gain enough support to supplant the DOL’s rule.

Another proposed alternative attempts to attach a rider to the government’s year-end omnibus spending bill. This would require the DOL to submit their proposal for an additional comment period before the rule is finalized. If the rule undergoes another comment period, odds are it will be subjected to a re-proposal, which could delay the process long enough so the Obama administration would be unable to pass the rule in the remainder of its term. Supporters can see a small silver lining, as another comment period could present a negotiating opportunity for financial professionals and the Department of Labor to see eye-to-eye and reach an acceptable agreement.

Still, a compromise may be difficult to achieve, as the DOL seems unwilling to budge on the rule’s current iteration of protecting investor interests without constricting financial professionals’ ability to provide quality advice for clients. Opponents have shown similar resolve in their position that the rule will be detrimental to advisors and their clients.

Both sides present valid points on the issue, but obstinacy has brought progress to something of standstill. With a vote to extend the December 11 spending bill deadline looming, and a bit over a week until Congress breaks, some concessions will have to be made – and quickly – if the rule is to pass before the new year.