A preliminary read of the Department of Labor’s recently released final rule amending the definition of fiduciary on retirement advice is a mixed bag of “the good, the bad and the ugly,” according to the U.S. Chamber of Commerce, which has opposed the rule.

The good, David Hirschmann, president and CEO of the Chamber Center for Capital Markets Competitiveness, said on a recent call is that the rule includes positive changes DOL fixed; the “bad” is that the rule “remains highly problematic” in certain areas, and the “ugly” initial read of the voluminous final rule shows that the rule “creates a new set of problems.”

Brad Campbell, the former head of DOL’s Employee Benefits Security Administration who’s now of counsel with Drinker Biddle & Reath in Washington, agreed with Hirschmann on the Thursday call that while some good changes were made to DOL’s rule amending the definition of fiduciary under the Employee Retirement Income Security Act — particularly in the best interest contract exemption (BICE) and proprietary products — small plans and small businesses came out big losers.

“It’s clear that everyone would have benefited from even a short reproposal of the DOL rule,” Hirschmann told reporters. “There are areas where DOL recognized the need for changes, and made some, but unfortunately it appears that either the changes don’t work or they [DOL] may have created some new challenges.”

While the Chamber will continue to analyze the rule, Hirschmann noted that the initial read shows that “in many ways DOL has expanded the importance of that [best interest] contract exemption, and we will now need to examine the BIC exemption around the uncertainty of its objective and the litigation risks it creates.”

Campbell agreed that he sees the “most significant issue” still being with BICE, in that “there are frivolous litigation risks and liability risks in the BICE that still remain, and that are going to increase costs for small businesses where advisors are willing to use the BICE exemption at all.”

The final DOL rule, Campbell said, “still requires someone using the BICE to make a series of judgment calls; these are subjective standards, not objective standards, and that difference really matters here.” Advisors could be sued on those “judgment calls,” he continued, and “a trial bar could say that ‘you made this decision but it should have been that decision.’”

The good, though, includes the fact that DOL addressed the “direct conflicts” with securities laws by taking out the requirement within the BICE that advisors make projections about the future performance of assets, Campbell said. “That was taken out and the disclosures were streamlined to make those more realistic on what could be disclosed.”

(Related: DOL Seems to Soften Fiduciary Rule Without Selling Out Investors)

Other positive moves includes the final rule clarification on how proprietary products can be provided, he added, as well as a more thorough “grandfathering” explanation of how existing IRA accounts “that might not be compliant” with the new rule can be transitioned.

Campbell gave a thumbs down to “education” provisions in the final rule that he said have a negative impact on small businesses. The final rule, he said, limits investor access to educational materials.

For IRA owners, “they aren’t able to get any references to investments that would illustrate what an asset class is,” he said. “So if I were to say to you, ‘based on your age and risk tolerance and so forth, typically someone like you might have 40% allocation to a large-cap fund,’ I’m not able to tell you which of these types of funds would be a large-cap fund.”

Also, when a company is doing an enrollment meeting for a new participant, “if the company were to tell me that I should look at rolling over my old 401(k) into my new 401(k) — something DOL has historically encouraged to avoid leakage out of plans — that would now be fiduciary advice and potentially a prohibited transaction for an advisor to tell an employee to do that,” Campbell explained.

Another setback in Campbell’s mind is that the DOL “creates a whole new rationale of how they want to handle annuities” in the final rule.

DOL has now “suggested that all variable annuities – individual, group and fixed indexed – would only be in the BICE exemption and not part of the traditional insurance exemption, while fixed annuities would remain in the traditional insurance exemption,” Campbell explains. “That’s significant because the BIC exemption raises some real barriers for use by those folks who are looking at those annuities. And it also creates confusion for the purchaser.”

Hirschmann and Campbell also agreed that a negative change for small plans and small companies is the final rule’s threshold test for what is classified as a large plan.

The proposed DOL rule “had a cutoff that you were a small business unable to have the same services as large business if you had 100 participants or $100 million or more in assets,” Hirschmann said. “In the final rule, DOL has eliminated participant threshold test with an asset based threshold of $50 million or more. That goes the opposite direction in addressing the discrimination against small business because that $50 million asset threshold is much greater than the 100 participants.”

Added Hirschmann: “A 1,000-person plan might still well be under $50 million in assets. Large plans got access to services and advice on terms that small businesses didn’t, which would cause small businesses more expense.”

The final rule does include “a significant change in how small plans and small businesses are treated,” Campbell agreed. “To go from a 100-participant test to a $50 million asset test is a major change, and it goes the opposite direction of what the Chamber and other small-business organizations were asking for.”

Hirschmann noted that Chamber will continue to address a multi-pronged approach to seeking remedies to areas of concern — by working with DOL and  the Securities and Exchange Commission, as well as through legislative or legal means.

Campbell said that DOL “has acknowledged that there will be changes and issues, that [the rule is] not perfect,” adding that DOL will likely have to issue subsequent guidance.

— Check out Financial Planning Coalition ‘Applauds’ DOL Fiduciary Rule on ThinkAdvisor.