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Digital firms walk a fine line in opposing Trump's fiduciary actions

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Some of the most ardent supporters of the Department of Labor when it was crafting the fiduciary rule have gone silent since President Trump has targeted the regulation for repeal.

While some digital wealth management firms are standing up for the rule, others are treading carefully in their opposition to the president's actions, reflecting private concerns about being labeled partisan or incurring Trump's wrath on Twitter.

"Lord knows he's been willing to call out anyone who disagrees with him," says Barbara Roper, director of investor protection for the Consumer Federation of America. "It is fraught with peril for companies."

Trump has taken to Twitter to sharply criticize other companies such as Ford, Carrier and now Nordstrom, though he has yet to discuss the fiduciary rule on his preferred social media platform.

Meanwhile, opposition is mounting to his memo on the regulation, instructing the Department of Labor to review and possibly replace it.

On Tuesday, Sen. Elizabeth Warren (D-Mass.) sent a letter to Edward Hugler, acting Secretary of Labor, criticizing any attempt to delay or rescind the rule.

Her letter specifically noted that she had received letters of support for the rule and opposition to any delay from Betterment, Personal Capital and the XY Planning Network.

Betterment and Personal Capital have been far more vocal in their stance against the order than other digital firms.

"We won't let the fiduciary rule go down without a fight," Personal Capital CEO Bill Harris said on Twitter.

Harris also posted a blog that took swipes at attacks on the rule as well as Gary Cohn, a Trump adviser and director of the United States National Economic Council.

Personal Capital doubled down on its support with another blog post on Monday, highlighting client support for the rule.

Betterment has adopted a milder but still critical approach, focusing its statements on the rule itself rather than the administration.

"[It was] a sad day for individual investors," Betterment CEO Jon Stein told Financial Planning when asked for reaction to Trump's memo. "Repeal means favoring the bottom lines of the financial services industry over the American people, who deserve financial transparency and honesty.”

Their current advocacy separates them from their peers. Digital 401(k) provider blooom reiterated in a blog post it was above politics.

"Political administrations will come and go, lobbyists and elected officials might try to change the rules to serve special interests, but you can rest assured that we here at blooom have always — and will always — only follow one rule: acting in your best interest," stated Greg Smith, president of blooom.

Scott Puritz, managing director of Rebalance IRA, says while the firm was not drafting a formal statement, it stood by its backing for the regulation.

"We've been very supportive of the rule, as one of the most profound pro-consumer pieces of regulation in decades," says Puritz, who testified in favor of it during a public comment period, part of the Department of Labor's rule-making process.

"We are already starting to see some of the benefits of the rule in the marketplace. There is a greater awareness on the part of the consumer on fees and making sure their adviser doesn’t have conflicts of interest."

"Lord knows he's been willing to call out anyone who disagrees with him," says Barbara Roper, director of investor protection for the Consumer Federation of America. "It is fraught with peril for companies."

Puritz adds his firm has concerns "there will be considerable political pressure placed on the Trump administration to unwind the rule for a simple reason — there are $17 billion in unnecessary fees that the rule as it is implemented will remove from consumers — and the incumbent industry wants those fees back, they want that revenue back."

Wealthfront, which received lavish praise from then-Secretary of Labor Thomas Perez during the debate over the rule, also reiterated its support.

"We've worked closely with the Department of Labor to show how technology can cost effectively enable fiduciary service to investors with any account size," says Wealthfront chief executive Andy Rachleff. "We believe today’s consumers are more educated than ever, and will demand a fiduciary service whether or not the DoL rule goes through."

"There's a common misunderstanding that our business and automated investing services in general need this new regulation to succeed," Rachleff adds. "The growth of automated investment services like Wealthfront is fueled by a generational shift, not a regulatory one."

Others, however, have been silent since Trump issued his memo to the Labor Department.

Financial Engines, whose executives supported the rule and were on hand for its signing ceremony in D.C., deferred commentary on the memo.

"Financial Engines made a business decision to serve as a fiduciary before the rule was enacted and we’ll continue to serve our clients as a fiduciary regardless of the outcome of the rule," said company spokesman Mike Jurs.

One fintech executive with a different take was Aaron Klein, CEO of Riskalyze.

"Most of the industry friends and colleagues in my Twitter feed are bemoaning these actions by President Trump. I’ll skip that and instead try to find the silver lining by asking a question: why did it take 1,000 pages to solve this problem?" Klein wrote in a post on Medium.

"The best interest economy isn’t going to go away, and the broader principle is still true: investors have a right to know whether the financial professional recommending a solution is acting in their best interests, or is a salesperson recommending a product," Klein says.

"The silver lining is that we might be able to get a one-page rule that simply forces the industry to stop obfuscating about the difference and make it clear to the investor which kind of financial professional they are working with."

In addition to any political concerns, companies may also feel hesitant to make statements due to the uncertainty surrounding the rule's fate, the Consumer Federation of America's Roper adds.

"To a certain extent, people are are waiting to figure out what's exactly happening," she says.

Roper still had praise for the firms that had already staked their support for the rule.

"I thought it was terrific that they came forward in their communications with Senator Warren and didn’t sit back and wait to be asked," Roper says. "If that’s because they are young and brash, or they see a marketing opportunity, whatever the reason it’s a positive message."

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