Shortly after the US elections, Trump adviser Anthony Scaramucci, who runs the $12.4bn SkyBridge Capital hedge fund firm, told The Financial Times that the incoming administration should dismantle the adviser reforms intended to put an end to hidden fees and conflicts of interest in the investment market.
Regulation flawed
Donald Andrews, a compliance attorney with US law firm Venable, believes the fiduciary standard will be delayed temporarily in a bid to work through some of the kinks in the legislation.
“The bottom line is that the DoL requirement initially was not really an optimal roll-out and not, in my opinion, effectively thought through,” he told International Adviser.
Independent advisers in the US, around 52% of whom advise on retirement, work on a fee-based model, do not receive commission and will not be affected much by the proposed rule.
The regulation will have the biggest impact on brokers, who currently must sell investment products that are suitable for their clients, a less-stringent standard than the fiduciary requirement whereas investment advisers already adhere to a best-interest standard.
SEC proposals
Andrews thinks the DoL rule clashes with the Securities Exchange Commission (SEC), which “already has rules on the books that cover a lot of this that simply need to be enforced”.
The SEC has previously said it will propose new rules in April for raising investment advice standards that will require both investment advisers and brokers to meet a fiduciary standard for advice to retail customers.
Trump’s opposition to the 2010 Dodd-Frank financial reform law, giving the SEC the authority to push through such measures, now casts doubt on whether the planned proposals will go ahead.
Fiduciary rule delay?
However, Andrews believes regardless of Scaramucci’s remarks, the DoL’s fiduciary standard is likely to get the green light due to “strong political will” for consumer protection on both sides of the Republican-Democrat divide.
“The [DoL] rule will be put on hold as they make an attempt to sort out who should do what, but my sense is there is still a strong political will to protect retirements assets in either a Republican or Democrat administration,” added Andrews.
Brian Dunhill of Belgium-based IFA firm Cross Border Planning, which specialises in advising US expats across Europe, said it’s unlikely the DoL requirement will be scrapped, noting that the standards have been driven by clients wanting more transparency around charging rather than government regulation.
“While there has been lots of talk about the rollback of the fiduciary rule by the DoL, unlike Europe the move towards fiduciary standards has been led by the consumers and advisors not by the government,” Dunhill, who used to work as an adviser for US investment bank UBS, told IA.
