On the heels of the surprising outcome of the presidential election, the financial services industry has entered a period of uncertainty when it comes to one of the most sweeping regulatory changes in a generation.
The Department of Labor’s fiduciary rule is on the doorstep of being implemented in a few short months. However, there are very real rumblings from the Republican party that its leaders are gearing up to take down just about every facet of the Obama administration that they can, including the DOL rule.
(Read Melanie Waddell’s analysis of the rule’s chances of survival under Trump and a GOP-controlled Congress.)
Regardless of your political leanings, and whether you are pro- or anti-DOL rule, this political movement has created doubt in the industry over whether to continue investing in the technology necessary to comply with a best interest standard.
On the one hand, the cost of new systems, technology upgrades and staff training can easily run into the millions of dollars for broker-dealer and RIA firms, which steps that may ultimately not be required by law, despite the many benefits that deploying the latest technologies brings.
On the other hand, if the Republicans fail to repeal the rule, are you willing to risk the costs, fines and potential liabilities for non-compliance that are sure to come?
Right now, I would say that the betting odds are roughly 4-1 that the rule will become law by the April 2017 deadline.
The reasons the odds are vastly in favor of it going through are the tremendous obstacles in a very short period of time that would have to be overcome in order to repeal it. These include the fact that it will take an act of Congress to overturn it, something that even on a fast track can take a year or more.
Additionally, the Democrats are not dead yet and have some formidable proponents that can filibuster any movement to repeal. It’s also true that the DOL rule will most likely not be the administration’s top priority – Obamacare, Dodd-Frank and immigration will attract most of its attention in the next couple of years.
Ultimately, the biggest wildcard is Donald Trump himself. Will he abandon his campaign promises to protect Americans and their retirement savings from ‘evil’ Wall Street or go along with the party whose leaders abandoned him during the election to repeal a pro-investor rule?