The Department of Labor new rule: Financial advisor trap

ONE OF THE most important investor protections in decades took effect on June 9. The new rule, issued by the Department of Labor, sets in motion a seemingly commonsense requirement that those who advise on retirement investments must put their clients’ interests ahead of their own. Yet it marks a revolution in retirement security, the result of an epic seven-year battle between consumer advocates and the financial industry that sunk millions of dollars into white shoe lobbying firms, industry-sponsored studies, congressional campaign contributions, and major lawsuits in an effort to block the rule.

“Investment advisers shouldn’t be able to steer retirees, workers, small businesses, and others into investments that benefit the advisers at the expense of their clients,” Assistant Labor Secretary Phyllis Borzi, who developed the rule, said in 2011. “The consumer’s retirement security must come first.”

The rule, finalized in April 2016, was scheduled to take effect a year later in order to give firms time to comply. It only survived till now thanks to a veto by President Obama of legislation that would have permanently blocked its implementation; Rep. Paul Ryan, who led the charge in Congress, had tarred the rule as “Obamacare for financial planning.”

Since the rule was already final when President Trump took office, it was invulnerable to his day one directive freezing all pending rule making. Nevertheless, within two weeks Trump signed a memo directing the DOL to review the rule and potentially rescind it. In March, before Trump’s labor secretary had even been confirmed, the Department of Labor issued a proposed rule delaying implementation for 60 days — bringing us to June 9 of this year.

Read on.

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One response to “The Department of Labor new rule: Financial advisor trap

  1. Pingback: New rules for financial advisers | California freelance paralegal

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