Likely result of fiduciary rule: You’re on your own, grandma

Watchdog reports:

With one eye on Washington and the other on their client list, the nation’s financial industry is already ramping up for the “fiduciary rule,” which dramatically overhauls the regulatory regime for retirement-investment advice.

Intended to protect investors from predatory financial advisers, industry insiders warn the rule will leave many people to fend for themselves in an automated, impersonal world of stripped-down investment choices.

The rule updates the Department of Labor’s 1974 Employee Retirement Income Security Act. It says any professional who is paid to handle retirement investments has a fiduciary duty, or is legally obligated, to put their clients’ “best interests” first, rather than simply finding ”suitable” investments.

This includes disclosing any possible conflicts of interest and clearly stating fees and charges, which means far greater scrutiny of commission-based accounts and more liability for advisers. It also means more time spent on paperwork for retirement accounts. A Labor Department report says complying with the rule could cost as much as $31.5 billion over 10 years, making it the most expensive federal rule of 2016, according to the American Action Forum (AAF).


The rule is slated to take effect April 10. But a Feb. 3 memo from President Donald Trump ordered the Labor Department to further review the rule’s economic impact. There’s also a bill in the works to delay the rule for two years.

But many investment firms are preparing for the rule anyway. Anticipating they won’t generate enough revenue to offset the added costs, they have already begun to adjust staff and services to cut back on the number of fiduciary relationships with clients.

The big firms sure like big regulations to stifle competition.