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Update on DOL Fiduciary Ruling

April 18, 2017

One of the biggest questions for the financial advice industry this year revolves around the DOL fiduciary ruling and whether the Trump Administration will take steps to modify or repeal the measure. Trump’s February 3rd directive suggested that the administration does wish to modify the ruling, however, whether they can is looking less likely.

 

The fiduciary ruling requires those who provide advice on retirement plans to do so in a way that serves their client’s interests, not their own. Whether or not the ruling goes into full effect, what it has done is bring more public awareness to the meaning of fiduciary and the importance of receiving advice from those who have a legal obligation to place serving your interests ahead of their own.

 

The opponents of the fiduciary ruling argue that the extra regulation creates a financial burden on advisers as they have to take steps to comply with the ruling, which takes time, effort, and ultimately, money. Regardless of how exactly the ruling will be implemented, you can simply ask your adviser if they are a fiduciary. (For the record, TABER Asset Management is a fiduciary.)

 

The DOL ruling may prove difficult to modify because of a Supreme Court ruling during the Reagan Administration. During the beginning of the Reagan Administration, the National Highway Transportation Safety Administration tried to repeal a rule from the Carter Administration requiring seat belts and airbags in vehicles. In Motor Vehicle Manufacturers Association v. State Farm Insurance, the Supreme Court ruled that the action was “arbitrary and capricious.” NHTSA failed to show that taking the regulation off the books was necessary.

 

There is a stacked deck against the Trump Administration to repeal the Obama Administration ruling. The DOL only has a few months to reassess a ruling that took six years to finalize. Add to that, at this time, the Senate has yet to confirm the DOL secretary, Alexander Acosta. The DOL estimates that pushing back the implementation date will cost investors $147 million over one year and $890 million over 10 years.

 

TABER Asset Management is a fiduciary based in Des Moines, IA. Please email us at invest@taberasset.com or call us at 515-557-1860 for more information on our financial services.

 

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