PHOENIX ― The Department of Labor's 60-day postponement of the fiduciary rule ― just a week before the regulation was due to be implemented ― may have created more problems for the industry than it solved.
On one side, fiduciary advocates are pushing back, arguing that the regulation is a much needed investor protection that can't be delayed. On the other, opponents are concerned the delay doesn't give the department time to conduct the review ordered by President Trump. Moreover, if the regulation is revised, some firms are concerned they will have to adapt compliance systems yet again, and on short notice.
Darryl Metzger, director of the private client group at Hilliard Lyons, likens it to changing the rules of a football game after the teams are already on the field.
Metzger's firm, which has more than 400 advisers, was "100% ready" for the original April 10 deadline, he says.
"Now, like all firms, we just want to know what the rules are going to be," says Metzger, who spoke with On Wall Street on the sidelines of SIFMA's Private Client Conference.
During the two-week comment period on the proposed delay, a number of wealth management firms petitioned the Labor Department for an even longer postponement. Several, including Ladenburg Thalmann Financial Services and Raymond James, asked for 180 days. Baird, a Milwaukee-based wealth manager with about 800 advisers, went a step further and requested at least a year-long delay.
"No retirement investor's interest will be served if the fiduciary rule goes into effect before we have certainty on the products and services that can be provided under the final rule," Baird said in its letter, which is available on the Labor Department's website.
Even companies that work in tandem with brokerages are affected by the current deferral. For instance, the fiduciary rule touches upon many of the services that Broadridge Financial Solutions provides, according to Traci Mabrey, head of wealth solutions at the firm. The global fintech company works with wirehouses, banks and independent broker-dealers, as well as individual advisers.
"Obviously, we're in flux just as our clients," Mabrey says.
'A SOLOMON TYPE OF DECISION'
Some executives see the postponement as a mixed bag.
"We got the delay [of the rule] and all the exemptions until June 9," Christopher Gilkerson, general counsel at Charles Schwab, told conference attendees. He adds: "It [also] doesn't sound like they have a lot of willingness to entertain another delay beyond that June 9 date."
Gilkerson notes that the Labor Department was inundated with comments from firms, advisers and clients ― and many of them were against any changes to the regulation. Indeed, the Labor Department said it received over 193,000 comments and petition letters.
"Charitably, it's like a Solomon-type of decision," Gilkerson said of the department's explanation of the postponement.
But, he adds: "Less charitably, the professional staff was clearly in favor of the rule as it was adopted."
Whether the industry gets another delay, as well as possible revisions, may rely upon whether Trump's nominee to lead the Labor Department gets confirmed by the Senate. The president has been slow to fill positions within his administration, and the previous nominee, Andrew Puzder, withdrew his name.
"We hope [Alexander Acosta] gets confirmed, because there is a lack of leadership at the Department of Labor, at least a lack of political leadership," says Ira Hammerman, general counsel at SIFMA.
The trade group, which has long advocated that the SEC take the lead on crafting a best interest standard, is concerned that the Labor Department can't conduct a thorough review of the rule within 60 days as is required by Trump's memo.
Quote"It doesn't sound like they have a lot of willingness to entertain another delay beyond that June 9 date," Christopher Gilkerson, general counsel at Charles Schwab, said.
"Even before we talk about technology solutions, paperwork required to change accounts ― before we get to any of that implementation and the time required ― just on that very appropriate and narrow question of, is 60 days enough to complete the review ordered by that memo, the answer is no," Hammerman says.
Meanwhile, fiduciary advocates are mobilizing to save the regulation. A campaign launched this week by several investor protection groups includes a "retirement ripoff counter" that purportedly tabulates how much funds clients are losing due to bad investment advice. It's appearing in several locations around Washington.
Still, what happens next isn't entirely clear.
The fiduciary rule, though not yet applicable, is the current rule on the books. The new administration could also replace it, but it would be a lengthy process. And Trump has not taken a clear public stand; he didn't even say the word fiduciary during the Feb. 3 signing ceremony for his memo on the regulation, according to a transcript posted on the White House website.
Brand Meyer, an industry veteran of 46 years who oversees Wells Fargo Advisors' efforts to comply with the rule, told attendees it has been a challenging process for the industry.
"In my long career I have never seen anything play out quite like this. It's zigged and zagged," Meyer said.