A conversation with Larry Divers, Executive Vice-President and senior retirement expert, Cannon Financial Institute
We sat Larry Divers down a few days ago, allowed him to drink three large cups of coffee, then asked him the most pressing question of the moment in our industry. Has President Trump repealed the DOL Fiduciary Rule?
“No, not even close,” said Larry.
Then why do so many people think the President did this? “The political culture of the United States fosters imprecision of language. When you combine that with a media culture which endeavours to make every news story as sensational as possible, then the stage is set for misunderstandings. Add something as complex as the DOL Fiduciary Rule to the mix and you end up with a perfect storm of confusion.”
So, what exact action did President Trump take regarding the DOL Fiduciary Rule? “First and foremost,” Larry explained, “he did not issue an Executive Order repealing the DOL Rule. Issuing, or repealing, a Federal rule is a complex process and agencies must follow the strictures of the Administrative Procedure Act of 1946. Just as no President has the authority to issue a federal rule by Executive Order, no President has the authority to repeal a federal rule by Executive Order.”
Creating a federal rule is a complex process which can take years, Larry explained. Conversely, undoing such a rule is a difficult and time consuming process which also takes years.” President Trump can issue an Executive Order to reconsider implementation of the DOL Fiduciary Rule but not repeal it.
So, what type of order did the President issue? According to Larry he issued a memo to the Secretary of Labor directing three things*. First, examine the Fiduciary Rule and determine if it will negatively affect the ability of Americans to gain access to financial advice on retirement issues; when the rule is applied, will it reduce access to various retirement services products. The second directive is to determine when implemented will the rule cause disruptions in the retirement services industry which could adversely affect investors. The third and last directive is to determine if it will cause litigation on such a scale as to increase the pricing of retirement services products.
And what happens if the Secretary of Labor concludes any of the points raised by the memo from President Trump are valid? “… then you shall publish for notice and comment a proposed rule rescinding or revising the Rule, as appropriate and as consistent with law.”
With all of this uncertainly, Larry feels Advisors, “should be sensitive in the conversations with clients because most of them have some awareness of this issue and research shows many feel their Advisors are already working in their clients’ best interest. In addition, many of the larger firms have announced they will comply with the major provisions of the rule regardless of what the politicians finally decide.”
Larry concluded by suggesting Advisors, “should take the intent of the DOL Fiduciary Rule as it stands and follow it as a ‘best practice’ given it is principles based.”
Will the rule be delayed? Yes. Revised. Yes. Completely stopped? Unlikely. Larry concluded with this final observation about the DOL Fiduciary Rule: “When it comes to the rule, let the old saying that nothing is so powerful as an idea whose time has come, guide you.”
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Written by Charles McCain, author and financial services industry expert.