After multiple back-and-forth debates with my Inside Information audience, I’m picking up surprising opinions about the Department of Labor’s (DOL) fiduciary rule and its imminent demise.

Make no mistake, there will be a demise as the new administration takes office. Anthony Scaramucci is a member of President-elect Donald Trump’s transition team executive committee and has been cited as the person Trump leans on for advice when he’s making policy in the financial sector. He is also a leading candidate to be the new SEC chair and has compared the DOL rule to the legalization of slavery. Specifically, he said, “It’s about like the Dred Scott Decision.” To say he has a repeal on his agenda is to say that he’s breathing oxygen. It may not happen before the DOL’s effective date of April 10, but you can bet the brokerage firms won’t have to get their clients to sign a BIC exemption form[1] after, say, June of this year.

DOL Fiduciary Rule

Most of my newsletter subscribers are already fiduciaries, and I was expecting them to be big fans of a rule that expanded fiduciary requirements. I was surprised to discover that they actually have a lot of negative feelings about the DOL rule.

Their arguments against the rule come in two parts:

  1. Since they already act as fiduciaries, they resent the idea that some government agency is trying to impose regulations making that a requirement. This came up in my detailed explanation of what fee-only advisors would have to do to comply with the DOL rule – among other things, provide clients, before any advice is rendered, with a pledge that you will act as a fiduciary at all times in the relationship, and be careful not to comment too specifically on their current situation before that pledge is offered and signed. You also have to document the relative fees, quality of funds and scope of services between the client’s 401(k) plan and the IRA portfolio you’re proposing.

Who needs all that extra work?

Fiduciary advisors take pride in their decision to forego conflicts of interest (and the revenues that are available through them), and to act in the best interests of clients. If you’re required to do so, it takes away from this client-empowering decision. And if you’re required to fill out a lot of paperwork proving that you’re not trying to rip off the client when you give routine advice, it takes time away from client relationships and generally feels insulting and intrusive.

Article continues at Advisor Perspectives

Bob Veres’s latest book, The New Profession, is available on the Inside Information website: http://www.bobveres.com.