Fiduciary Standards, Yes. DOL Rule, Maybe

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By Sean Forbes

A tighter focus on unconflicted financial advice appears to be the wave of the future, whatever the fate of the Labor Department’s fiduciary rule.

Most of Wall Street’s leading financial firms seem to support the Obama-era retirement investor protection rule, Sen. Elizabeth Warren (D-Mass.) said in a letter today to Acting Secretary of Labor Edward Hugler. But are firms supporting the concept of standards or the rule itself?

Warren’s missive was the latest in a string of volleys between Warren, President Donald Trump and Republicans in Congress. Trump issued a memorandum Feb. 3 directing the DOL to re-examine the fiduciary rule, also called the conflict-of-interest rule.

The rule was finalized in April 2016, became effective in June, and is scheduled for implementation April 10. The president’s memorandum didn’t delay that date -- at least for now.


The day before Trump’s inauguration, Warren sent letters to 33 financial firms asking them where they stand on the rule. Of those firms, 21 replied.

Many of the responders—including Vanguard Group Inc., BlackRock Inc., Charles Schwab Corp. and Transamerica Corp.—indicated support for best interest standards and “welcomed the rule.” Warren quoted from some of the replies in her letter.

But a close reading of those responses shows that while the firms do support stronger advice standards for retirement investors, they aren’t necessarily enthusiastic about the DOL’s version. They say they support the rule’s “intent,” or “core best interest concepts,” or “a best-interest standard,” wording similar to comments made in response to the proposed rule.

“It is extremely difficult to get individual firms to commit to a clear position on the fiduciary rule,” Seth Rosenbloom, associate general counsel for New York-based Betterment, told Bloomberg BNA. “One common tactic, which is evident here, is to provide a general statement about the importance of the rule’s objectives, but no clear commitment to its actual implementation.”

And that suggests that the fight will go on.

Industry Trade Group Likes Trump Memo

Several of the firms or their subsidiaries are also members of the Washington-based Investment Company Institute, which represents the mutual fund industry and welcomed Trump’s memorandum.

These companies include all of those mentioned above, and others, such as TIAA’s Nuveen LLC, U.S. Bancorp and Lincoln Financial Group PLC.

With only two months to go before the rule is implemented, advice firms are keeping an eye on fiduciary developments while also preparing for the April implementation.

“It’s too soon to know what impact the Administration’s memo on the DOL fiduciary rule might have on our members,” Rachel McTague, an ICI spokeswoman, told Bloomberg BNA. “Pending further, more definitive, regulatory developments, the industry’s efforts to implement the rule continue.”

Unsolicited Firms Bullish on Rule

Warren also received three unbidden responses from firms that wholeheartedly support the rule, including robo-advisers Personal Capital Corp. and Betterment LLC. Robo-advisers provide online personalized digital advice, and typically rely on passive investments such as exchange traded funds.

“The letter from Senator Warren is consistent with my observation in the marketplace,” Rob Foregger, co-founder of San Carlos, Calif.-based Personal Capital, and currently a shareholder there, told Bloomberg BNA in an e-mail.

The overwhelming majority of U.S. financial firms are in favor of a fiduciary standard, and are ready for its implementation, said Foregger, who went on to co-found Chicago-based NextCapital Group Inc. “I think it is fair to say that few firms will be going back to the old way of doing business, irrespective of whether or not the new Administration repeals the Fiduciary Rule. Aligning the retirement industry with the needs of the average American saver is not only the right thing to do, it is the winning forward-looking business model. No question.”

But if the rule dies, then what? Ultimately, individuals are responsible for their own retirement planning, Tess J. Ferrara, a partner at Schiff Hardin LLP, in Washington, and former trial attorney at the DOL, told Bloomberg BNA. “Maybe the best thing that comes out of this whole cabal is that people start asking the right questions,” such as how they’re being charged and whether the adviser operates under fiduciary standards or the lesser suitability standards when talking with an adviser, she said.

To contact the reporter on this story: Sean Forbes in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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