Even as President Trump pushes to loosen U.S. regulations, there is one he might find more difficult to roll back or abolish. The fiduciary rule, set to begin implementation on April 10, has little chance of being derailed, says Skip Schweiss, the managing director of TD Ameritrade Institutional’s Advisor Advocacy & Industry Affairs division.
In a conversation with Financial Planning, Schweiss, who is also responsible for the company’s retirement plan services platform, lays out in detail the obstacles that will face those who seek to delay or eliminate the rule.
Q: Some industry insiders believe the new administration will kill the fiduciary rule. Do you agree?
A: Just because the industry had a year to get into compliance doesn’t mean it’s not final. It’s final. In fact, the Congressional Review Act allows Congress 60 days to pass a bill, stopping any new regulation from going into effect.
Congress passed that bill within the 60-day window, between April and June this year. [President Obama] vetoed it. Congress doesn’t really have much more to say about it. So that avenue is closed.
I heard people say, “Well, Trump will issue an executive order stopping it.” He can’t issue an executive order stopping a final rule.
I’ve heard people say, “Well, Congress will defund the enforcement of the rule.” The enforcement is in the litigation. The DoL isn’t going to enforce it; litigation is. Congress has nothing to do with funding that. So that avenue is not there.
I’ve heard people say, "Congress is going to pass a law stopping the bill,” so the rule possibly could be blocked that way. They had that opportunity, and it didn’t work.
Q: Is it possible for the DoL to push back the enforcement date or kill the rule?
The new Secretary of Labor could do something like, “Well, we’re going to push the compliance date back,” six months — whatever. Even that is a change in the rule, because the compliance date is baked into the rule. You would actually have to do actual new rule-making to even push the compliance date back.
They, at least in theory, have to get public input, and do a cost-benefit analysis to even push the compliance date back. So even that’s not a slam dunk.
I’ve heard people say it’s not that hard [to get a delay]. I wouldn’t be surprised to see the compliance date pushed back. They could say, “Look, this is going to be a huge change [for the] industry, and on these small businesses, and we need to give them more time.” I don’t think you’d have an enormous uproar about that in and of itself.
If the new Secretary of Labor then said, “Well, we will use more time to try to kill the rule, or to change the rule,” that’s whole new rule-making. I mean, the house is built, so [you can’t just] change the house. You can’t just wave a wand.
Q: Do you think the fiduciary rule will come into effect in April?
A: This rule took six years to implement in the first place. It faced a lot of political bickering. Now, you’ve got the Congress and the White House in the hands of the same party, so presumably they could do a rule-making faster than six years if they wanted to.
But the point is, it isn’t an executive order, or a wave of a wand to just do away with it, or change it. It’s not to say it can’t happen, or it won’t happen, but I think it’s a steeper road than some people think.
Q: At this point of uncertainty over the fate of the rule, what advice would you give to the advisers?
If I’m an investment adviser and the rule gets pushed back or somehow ultimately killed, I would think, “I’m going to go ahead and comply with it.”
I would send my clients a letter saying, “Here’s what’s happening with this rule. I’m already substantially in compliance with it. I’m going to go ahead and comply, because I think it’s great. It’s in your best interest,” etc.
Heck, I would take out an ad in the local newspaper, saying, “I’m going to go ahead and comply with it.” I would take ads out on the local radio stations, saying, “I’m going to comply with this rule.” I think it’s an excellent way for investment advisers, to differentiate themselves from their competition.
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