On February 3rd, President Trump signed a directive delaying new Department of Labor investment advice rules that would have gone into effect in April. The directive delays the implementation by 180 days and instructs the DOL to conduct a new ‘economic and legal analysis’ to evaluate the impact on investors and the industry.
The rule would have required certain plan sponsors and financial advisors to act in the best interest of their clients in retirement accounts. Critics of the rule have argued that the rules are too complex and costly and would limit investor’s choices. According to the White House the rule ‘is a solution in search of a problem.’
The DOL had previously provided a fact sheet on the rules, but the web site where the fact sheet had previously been posted is now unavailable.
For investors, an important distinction needs to be made. Regulatory requirements covering investment professionals are not uniform. Investment professionals include both broker-dealers and their representatives and registered investment advisors and their representatives. There are many differences between the regulatory requirements placed on these two groups. Broker-dealers are held to a ‘suitability’ standard, while registered investment advisors are held to a ‘fiduciary’ standard of care. A fiduciary is held to a standard based on prudent investment decisions. The impact to broker-dealers and their representatives for the proposed rules would be a significant change. The rule changes would result in significant changes in compensation for broker-dealers.
Brightwood Ventures, LLC is a registered investment advisor firm and continues to provide a fiduciary level of care and will continue to provide updates to clients as the regulatory pictures clears.