Here’s What Trump’s Change to ‘Fiduciary Rule’ Means to Professors


Feb 06, 2017

Trump's Change to Fiduciary Rule

You may have heard that a Department of Labor ruling designed to safeguard the interests of retirement plan investors has been placed on temporary hold by President Trump.

Here’s what it means to you:

The so-called “fiduciary rule” was scheduled to go into effect in April, affecting all advisers who handle retirement accounts. A fiduciary is required to put the clients’ interests above all others, including his or her own. 

Most professors assume incorrectly that all financial advisers work as fiduciaries. In fact, some advisers– including many that handle university retirement plans- currently work under what is known as the suitability standard. The only criteria they need to meet when recommending an investment is that it is suitable for the client’s objectives. So in some instances, they choose one that pays higher commissions to the adviser and costs more for the client.

So if the ruling is ultimately cancelled, those companies will not be required to put your interests first when advising on your retirement account. To find out if your advisory company is a fiduciary, all you need to do is ask.

Trump has asked the Department of Labor for a review of the change initially proposed by President Obama in 2015. Last April, the Department of Labor issued the ruling, which would require all financial advisers who manage retirement accounts to operate under the fiduciary standard.

In the executive order, Trump writes that the fiduciary rule "may significantly alter the manner in which Americans can receive financial advice, and may not be consistent with the policies of my Administration."

In this period of uncertainty during the early days of the Trump administration, clients of Filbrandt & Company don’t have to worry. Filbrandt has operated as a fiduciary for decades, meaning our business model was already in line with the goals President Obama had in proposing the change. Filbrandt always puts its clients’ interest first.

Trump's order directs the Secretary of Labor to "prepare an updated economic and legal analysis" of three areas:

  • Whether the rule, anticipated to be implemented in April, has "harmed or is likely to harm investors due to a reduction of Americans' access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;"
  • Whether the rule has disrupted the retirement advice industry "that may adversely affect investors or retirees," and
  • Whether the rule is " likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services."

If any of those three points are met, or if the rule is found to hurt Americans' ability to gain access to retirement information and financial advice, the Secretary of Labor must rescind or revise the rule, according to the order.

Many companies in the financial advisory industry have opposed the rule, claiming the changes they will need to make in their processes to comply will be very costly. Of course, those costs will be passed along to clients.

Some companies are already well along the implementation process, knowing that the first compliance date was in April 2017. With the Trump order, the timeline for implementation is now unclear.

Click here to learn more about the benefits of working with a fiduciary adviser.



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