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Legal Malpractice Issues

Efforts to repeal and replace new fiduciary rule already underway

| Jun 13, 2017 | Professional Malpractice Law |

While most people might not realize it, the U.S. Labor Department’s new fiduciary rule covering financial advisors tasked with managing retirement accounts officially took effect last Friday.

To recap, the controversial measure calls for advisors on retirement accounts — from 401(k) plans to IRAs — to be subject to a universal fiduciary standard, which requires them to work solely in the best interests of clients — regardless of fees or commissions.

However, less than a week after enactment of the fiduciary rule, efforts are already underway in Congress to repeal and replace it.

This is perhaps not altogether surprising given President Trump’s issuance of an executive order delaying its implementation, the newly headed Labor Department’s lukewarm reception, and the altogether mixed response from the insurance industry.

As to who is spearheading these efforts, Reps. Phil Roe (R-TN) and Peter Roskam (R-IL) have introduced the Affordable Retirement Advice for Savers Act, a measure they say is designed to supply greater access to financial advice for low- to middle-income individuals, improve transparency and accountability via disclosure, and increase the ability of small businesses to provide retirement plans for workers.

Among other things, the legislation would:

  • Repeal the fiduciary standard and replace it with a best interest standard
  • Enable advisors to offer clients communications with portfolio models without creating an accompanying fiduciary responsibility, so long as the offer is accompanied by a written disclosure explaining it’s not intended to act as investment advice
  • Create a broader exemption enabling both variable compensation and recommendation of proprietary products provided that 1) the pay received by the advisor/broker is reasonable, and 2) communications are provided indicating that investment options are available at lower costs and products are based on “a limited range of investment options”

Experts indicate that the bill, which has drawn praise from the insurance industry, faces an uphill battle, eventually needing 60 votes in the Senate to pass. Regardless of what happens, they indicate that it should nevertheless provide DOL regulators tasked with reviewing the rule by the president with something of a template.     

Stay tuned for updates …

Consider speaking with a skilled legal professional if you believe you have been victimized by some form of CPA malfeasance or financial advisor misconduct.