The Obama administration is maneuvering through the final weeks of work on a fiduciary standard in an attempt to ensure its passage before a new administration takes office next year, experts say.
Compared with preliminary versions of the rule detailed by federal officials, "My expectation is that the key provisions of the rule will remain intact," says Barbara Roper, director of investor protection at the Consumer Federation of America. That's a sentiment shared by fiduciary advocate Sheryl Garrett, founder of the fee-only Garrett Planning Network, which President Obama has held up as a model practitioner of middle-class fiduciary financial planning.
Labor Department officials are currently at work on revising the bill after taking extensive comments from the industry and investor advocates over the summer. The next step is to send it for review to the White House Office of Management and Budget.
That could happen at month's end or in February, according to a report by Politico.
INCENTIVE TO RUSH
They have an incentive to rush, according to Roper, in order to preserve an expected Obama veto in case strong opposition in Congress results in a bill seeking to block the rule, Roper says
Once approved by the White House, it would be published in the Federal Register. From the date of publication, Roper says, Congress has 60 days to review it. During that period, lawmakers could approve a bill to kill the rule.
While the president would assuredly veto such legislation, the clock on the review process can sometimes run longer than 60 days for a variety of reasons, Roper says.
In the past, it has run into the next administration, which then resulted in action that differed from the preferences of the prior president.
NO 'BIG LOOPHOLES'
If it survives Congress, "Look for an implementation date of many of the rule's provisions some eight months later … around November 2016," NAPFA official and fiduciary advocate Ron Rhoades wrote in a recent blog post.
In the final version, neither Roper nor Rhoades expect changes to the most important provisions.
"I don't expect the DoL to open up big loopholes into the definition of investment advice," Roper says. "I don't expect the seller's exemption in the retail market,” which would allow advisors to not act as fiduciaries after they disclose themselves to be salespeople. “I don't expect them to water down the best interest standard. I don't expect them to give up the mandate to mitigate conflicts," she adds.
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