Just when we thought the Department of Labor (DOL) had a firm plan for implementing its fiduciary rule, it once again has changed the implementation date — extending it this time to 1 July 2019. The effects of this decision on advisers, brokers, retirement investors, insurance firms, and IRA accountholders is a mixed bag.

To recap, following the Trump Administration’s February directive to the DOL to review its fiduciary duty rule (Rule) — specifically to determine whether it harms retirement investors — the DOL changed the Rule’s applicability date from 10 April to 9 June 2017. Those relying on certain prohibited contract exemptions (PTEs), including the Best Interest Contract Exemption (BICE), would only need to comply with the Impartial Conduct Standards until 1 January 2018. By that time, the DOL expected to have completed the review mandated by the administration, and the full range of requirements under the adopted Rule (including compliance with the Best Interest Contract Exemption) would come into play.

Changing Deadlines

But that was not the end of moving target dates. On 6 July 2017, the DOL published a Request for Information seeking public information on (1) possible new exemptions or changes to the Rule and PTEs and (2) whether to further extend the applicability of certain provisions of the PTEs, including the BICE. In comment letters filed with the DOL, CFA Institute supported a delay of the Rule until January 2018 to allow time for a thorough review without the complexities caused by shifting deadlines. We also supported retaining the BICE in any final rule. Shortly after close of the open public comment period on these two issues, the DOL then filed to extend the applicability date of the Rule once again — from 1 January 2018 to 1 July 2019.

Current State of Play

What now, you may ask? Several things seem to be in play. As the DOL continues to conduct its review under President Trump’s directive, courts continue their review of litigation brought against the Rule. Most recently, a circuit court judge strongly questioned the DOL’s authority to issue the Rule, signaling that the court may find aspects unlawful. In addition, the SEC has issued its own public statement seeking information on what standard of conduct should apply, and it has indicated its willingness to collaborate with the DOL on a uniform standard of conduct for all who provide investment advice to retirement and non-retirement accounts. Moreover, if the DOL were to consider additional exemptions to its fiduciary rule and go it alone, it would need time to propose and adopt those changes, and firms would need time to implement them.

In the meantime, in early August the DOL issued its fourth Conflict of Interest FAQ — this one addressing applicability of the Rule to recommendations to contribute to a 401(k) plan or IRA, recommendations on increasing plan participation and contribution rates, and section 408b-2 service provider disclosure. And firms continue their innovations that help address and mitigate the conflicts of interest presented by advice providers who charge commissions or otherwise offer conflicted advice. And investors, now alerted to the issue by years of media interest, increasingly ask for additional information from their advisers, particularly about their standard of conduct.

The timeline for when all investors can expect their best interest to be honored just got longer.

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