On February 3, 2017, President Donald Trump issued an executive order that, among many other things, asked the Department of Labor to review its “fiduciary rule” previously scheduled for initial implementation in April of this year. Very broadly speaking, the fiduciary rule would require that financial professionals advising clients about investing in certain retirement accounts put the client’s interests ahead of their own. There are segments of the financial industry that have been fighting against some form of the fiduciary rule for years. Now that fight is much more in the public eye, thanks to President Trump. Although his executive order did not specifically ask for a delay in the implementation of the fiduciary rule, a review will effectively result in a delay.
A fiduciary duty generally is a duty to put the client’s interest ahead of the fiduciary’s interest. One of the stated purposes of the DOL rule is to reduce the dilatory effects to consumers of conflicts of interest between financial advisers and their clients.
Some examples of fiduciary relationships under the law are: attorney/client, guardian/ward, and trustee/beneficiary. But, more generally, in a relationship where one person has a superior knowledge about a particular subject matter, and puts him/herself in a position of trust with another who is in a position of comparative weakness, a fiduciary duty may be created under Oklahoma law.
Over the last year, financial advisory firms have been working to put systems in place to comply with the fiduciary rule. During this review period when the fiduciary rule is in limbo, it's likely that different advisory firms will make different decisions about how to proceed. Some firms will place their transition on hold, to wait to see what the DOL (or the SEC) will do following the review. Some will proceed with their transition that was already under way to comply with the fiduciary rule. For those firms that place their transition on hold, they will presumably be at a competitive disadvantage in terms of attracting and retaining clients. Competition among financial advisers is fierce. It would be a hard sell to attract and retain clients if your firm generally will not agree to put the client’s interests ahead of the firm’s interests, especially when some (most?) of your competitors are willing to do so.
As an aside, it’s worth noting again that attorneys owe a fiduciary duty to their clients. There’s no question that, in advising a client, the attorney must put the client’s interest ahead of his/her own. This is fundamental to the profession. As an attorney who has embraced her role as a fiduciary for over 22 years of practicing, the level of resistance within the financial industry to the fiduciary rule is somewhat staggering. But, justified or not, good business or not, fighting against the fiduciary rule, especially now that it has reached a level of public awareness that it simply did not have before, will create quite an image problem for financial advisers generally.