The planned delay was announced in a notice made public on Wednesday.
It follows a 3 February memorandum from new US president Donald Trump, who directed the department to examine the regulation and prepare an economic and legal analysis on the impact of the rule.
The fiduciary rule was scheduled to come into force in April 2017 but will now be delayed by 60 days while it is reviewed.
The move forms part of Trump’s strategy to wind back Obama-era regulations and open up investor options, a White House official had previously told Bloomberg.
A 15-day consultation period on the proposal closes on 17 March.
There is also be a 45-day window to submit comments or information related to other aspects of Trump’s memorandum.
After that, the Labor Department may allow the regulation to proceed, issue another delay, propose to withdraw it altogether, or pitch amendments.
Fiduciary rule
Former president Barack Obama’s administration finalised the fiduciary rule last year to put an end to hidden fees and high-commission investment products in a bid to help Americans saving for their retirement.
The regulation, widely regarded at the US-equivalent of RDR, is expected to have the biggest impact on brokers.
Currently, brokers must sell investment products that are suitable for their clients, a less-stringent standard than the fiduciary requirement.
Investment advisers already adhere to a best-interest standard.
Legal challenges
In recent months, the investor protection rule has faced a number of legal hurdles.
In early January, a US congressman introduced a bill that could delay implementation by at least two years.
Several industry groups, such as the National Association for Fixed Annuities (Nafa), have also launched legal challenges, although a US judge threw out the insurance body’s first appeal last November.
Scrapping the reforms would be welcomed by many asset managers, brokers, life insurers and other financial service providers as it threatens the provision of some of the industry’s most lucrative products.
Meanwhile, other critics say the rule would limit the ability of advisers to service clients who cannot afford to pay for financial advice and must use products that carry commissions or other indirect costs.
Temporary delay
Despite the proposed delay, Don Andrews, a compliance attorney with US law firm Venable, believes the fiduciary standard will be delayed temporarily but expects it to be implemented by June this year.
He added that US financial services companies will continue with efforts to comply with the rule.
“People have already spent a lot of money to comply with the rule and there’s a prevailing sentiment in the industry in favour of protecting investors,” he told International Adviser.
Some companies, such as Merrill Lynch, have adjusted their compensation so that advisers working with retirement accounts are paid a fee based on assets, rather than on commissions.
