NEW YORK (Thomson Reuters Regulatory Intelligence) - U.S. President Donald Trump’s memorandum to the Department of Labor to review its “fiduciary rule” without ordering an explicit delay to its compliance deadline of April 10, has fueled uncertainty over its impact on an insurance industry that has already begun to prepare for compliance with the regulation against conflicts of interest in the handling of retirement investment.
While the compliance deadline remains, the Labor Department has said it will consider legal options to delay the applicability date as it prepares to review the rule as directed by Trump's memo issued on Friday February 3 (here). However, there is no clear word yet on a definite delay or not.
The American Council of Life Insurers (ACLI), an association of life insurance companies and a strong opponent of the rule in its current form, said it was “pleased” with the announcement calling for the review but added a delay was also needed soon.
“It is urgent the Department of Labor grant a delay in the application of the regulation, given the significant and harmful impact of the regulation on the ability of Americans to save for a financially secure retirement,” ACLI’s Chief Executive Dirk Kempthorne told Thomson Reuters in a statement via email.
The proposed rule elevates all insurance agents providing investment advice on retirement products to the level of a ‘fiduciary’ and requires them to put the best interests of their clients first. The rule, designed to protect consumers from investment advice motivated by higher commissions on certain products, has been opposed on grounds of broker concerns over fees and a potentially reduced access to advice for lower- and middle-income investors.
The life insurance industry has not been supportive of the rule, citing potentially lower sales and high costs of compliance that could drive smaller players out of business.
Early on Friday, a draft of the memo showed Trump planned to formally delay enforcement of the rule by 180 days, and the financial services industry began to cheer reports. The final memo made public later in the day made no mention of a delay and the industry has been left with more questions over the fate of the rule.
An industry official said the conflicting reports had led to discussions over what the final memo actually meant for the industry as it did not signal any immediate change for insurers.
However, the overall directive to review the impact of the rule on investors, retirees, litigation and overall costs has been welcomed by the financial services industry.
“We applaud the president’s leadership in calling for the DOL to put the rule on hold to give policymakers time to reevaluate the rule in order to protect consumers from these negative consequences,” said Cathy Weatherford, chief executive officer at Insured Retirement Institute - an association for the retirement income industry.
She added the association continued to have significant concerns about the rule and its “sweeping changes” to the existing regulatory framework that will make it harder for savers to plan for retirement by “depriving them of access to affordable holistic financial advice and a wide range of investment options.”
The Financial Services Institute, an organization of independent financial advisors and independent financial services firms, said it was ready to work with the president and his administration on a new standard that protects investors, as the current fiduciary rules out for access to “critical retirement advice” for many.
“At a time when so few Americans are adequately saving for retirement, our elected officials should be doing everything possible to provide more incentives to save, not making it harder,” Chief Executive Dale Brown said.
(Antonita Madonna is a correspondent for Thomson Reuters Regulatory Intelligence, based in New York.)
This article was produced by Thomson Reuters Regulatory Intelligence and initially posted on Feb. 7. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters