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Legal Malpractice Issues

Secretary of Labor: New fiduciary rule will go forward

| May 24, 2017 | Professional Malpractice Law |

Whenever a new president is elected, there is a multitude of questions as to the degree to which the newly installed commander in chief will follow the lead of their predecessor. Indeed, this past January was no different when President Donald Trump took the oath of office.

While it’s perhaps a bit of an understatement to say there have since been major departures from the policies pursued by President Barack Obama’s administration, there has been at least one issue on which the path to be taken by the Trump administration remained unclear: a new fiduciary rule for financial advisers tasked with managing retirement accounts.

This implementation of this rule, originally scheduled for April 10, was delayed by an executive order issued by President Trump within a month of taking office. Specifically, it directed the U.S. Labor Department to stop the rule from taking effect for 60 days while a review was undertaken.

What exactly does the rule call for?    

In order to combat the issue of advisers in the financial service industry providing clients with potentially conflicting advice, the rule calls for all advisers to work under the same fiduciary standard.

Advisers weren’t doing this already?  

No. There are essentially two standards under which advisers working with retirement accounts of clients (401(k)s, 403(b)s, IRAs, etc.) can work: the more stringent fiduciary standard and the suitability standard.

What does the suitability standard require?

Advisers working under the suitability standard are only required to recommend suitable investment strategies. According to critics, the standard can create an incentive to pursue unreasonably high commissions and fees for advice and products.

The universal fiduciary standard called for by the rule, in contrast, would require all advisers to work solely in the best interests of clients — regardless of fees or commissions.

What’s the status of the rule?  

Secretary of Labor Alexander Acosta indicated just yesterday that the rule will go forward with only minor changes, officially taking effect June 9.

What’s been the response?

As expected, the response has been mixed. For example, national investment firms and the insurance industry are speaking out against the new rule, calling it unduly burdensome and detrimental to retirement savers.

Stay tuned for updates …

If you believe that you have been victimized by some form of CPA malfeasance or financial adviser misconduct, consider speaking with an experienced legal professional able to navigate this complex area and fight for justice on your behalf.