What’s Happening With the Fiduciary Rule?

President Trump has asked the Department of Labor to review its fiduciary rule, which required that financial advisors act in the best interest of the investors they serve when working with retirement accounts.

In a memorandum issued on February 3, 2017, President Trump ordered the U.S. Department of Labor (DOL) to take a closer look at the fiduciary rule, which was set to take effect on April 10. In response, DOL officials announced on April 4 that they have decided to delay the implementation of the rule for 60 days. As a result of this decision, certain aspects of the rule are now scheduled to become effective on June 9.

President Trump’s request and the DOL’s corresponding reaction indicate that further delays, or possibly even an outright reversal of the policy, may still be in store.

What Is the Fiduciary Rule?

The fiduciary rule provides enhanced protections to investors by imposing greater accountability standards on financial advisors.

It expands the definition of a fiduciary to include anyone who receives compensation for providing investment advice for tax-advantaged retirement accounts. Advisors who operate under the fiduciary standard must avoid conflicts of interest and are prohibited from making trades for a client for the sole purpose of obtaining a higher commission. They must charge reasonable fees and refrain from making misleading statements. The rule’s provisions do not, however, extend to non-retirement plan accounts.

“BNY Mellon has always operated as a fiduciary,” says Kathleen Stewart, Senior Director and Family Wealth Strategist at BNY Mellon Wealth Management. “But there’s definitely a recent trend throughout the broader industry toward the fiduciary standard.

“What the rule will do is help reassure customers that their advisors are acting in their best interest when helping them make decisions about their IRAs, 401(k)s or retirement plan rollovers. People want to work with someone that they trust, and they generally expect their financial advisor to be working in their best interest. When they discover that’s not the case, it can be eye opening.”

What’s Next?

The DOL has been charged with determining whether the fiduciary rule may “adversely affect the ability of Americans to gain access to retirement information and financial advice.”

Specifically, President Trump has asked the DOL to examine whether the rule would cause disruption in the retirement services industry or hinder investors’ ability to access retirement savings products. Should the DOL find evidence that those types of negative consequences could result, the agency is directed to rescind or revise the rule.

“There’s nothing to support the idea that people wouldn’t be able to get advice,” according to Stewart. “This is a rule that’s meant to help the average investor.”

Indeed, there is some evidence that the implementation of a fiduciary rule would not have an adverse effect on the availability of services. Some states already require that broker-dealers act as fiduciaries, or at least impose standards that exceed the basic suitability rules.

In 2012, a study was conducted that surveyed broker-dealers in these states to determine whether these regulations had a negative impact on the types of products and services they were able to offer, relative to broker-dealers in states with no fiduciary requirements.

Researchers found “no evidence that the broker-dealer industry is affected significantly by the imposition of a stricter legal fiduciary standard on the conduct of registered representatives.”1

At this point, the DOL has delayed the rule’s implementation and will continue to analyze whether it should be modified or rescinded. Though the existing rule may bring changes to the way services are provided and to how fees and commissions are charged, it may also bring peace of mind to investors. Without the rule, the burden would remain on investors to determine whether or not their advisor is truly working in their best interests.

1Michaele Finke, Ph. D, CFP® and Thomas Langdon J.D., LL.M., CFP®, CFA; “The Impact of the Broker-Dealer Fiduciary Standard on Financial Advice,” The Journal of Financial Planning, March 9, 2012.


This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation. BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation. ©2017 The Bank of New York Mellon Corporation. All rights reserved.