It’s fair to say that 2017 will be a year like none other. On Jan. 20, the country will swear in as president Donald Trump, who has promised a “new direction” for the country.
Kellyanne Conway, Trump’s campaign manager who’ll also serve in the new administration, told advisors during December’s MarketCounsel Summit in Miami that the American voter has “made good on its 30-year self-avowed description” of an ideal president being someone “outside the system who goes to Washington owing no one anything.”
In the campaign and since his victory in November, Trump consistently said his administration would institute fewer regulations and would cut taxes — personal and corporate — to help stimulate economic growth.
During this presidential election cycle, Conway stated that more than 70% of Americans “said all along that they wanted to take the country in a new direction. They wanted change.”
So what changes — revolutionary or otherwise — are in store for advisors and their clients under a Trump administration?
The Future of the DOL Fiduciary Rule
As for the regulators most of interest to advisors, on Dec. 8 President-elect Trump nominated as Labor secretary Andrew Puzder, a fast-food executive who’s come out against the Department of Labor’s overtime rule as well as increases in the minimum wage. Puzder has yet to weigh in on whether he’d delay or try to curtail Labor’s fiduciary rule.
“Puzder’s an unknown quantity as far as the fiduciary rule is concerned, though his general antagonism toward regulation is of concern,” said Barbara Roper, director of investor protection for the Consumer Federation of America, and a fiduciary rule supporter. “We can only hope that he’ll live up to the president-elect’s pledge to make Washington work for average Americans. After all, this [fiduciary] rule directly pits the interests of workers and retirees against the interests of powerful financial firms fighting to preserve their ability to profit at their customers’ expense. So if that pledge was more than just empty campaign rhetoric, the rule should be safe.”
Duane Thompson, senior policy analyst at fi360, said that it’s appropriate for the choice of Puzder to get a lot of attention. However, whoever becomes the head of DOL’s Employee Benefits Security Administration (EBSA) “may have an even greater influence on pension regulations and any modifications” to DOL’s rule.
The current head of EBSA, Phyllis Borzi, is the original architect of the fiduciary rule, but as of mid-December the Trump transition team hadn’t announced that level of appointments.
Industry officials including Skip Schweiss, head of advisory advocacy at TD Ameritrade Institutional, agreed that Labor’s fiduciary rule could be delayed under a President Trump, but not all-out derailed. Even a delay, Schweiss said, would require a rulemaking by the department, which would only come after a new Labor secretary is formally nominated and then confirmed by the Senate. “There are 80 days between the Jan. 20 [presidential] inauguration date and the [DOL rule’s] April 10 compliance date. Not a lot. We likely aren’t going to know about some sort of delay, at a minimum, [before] February or March.”
Trump chose former SEC Commissioner Paul Atkins, a conservative Republican and Dodd-Frank Act opponent, to counsel him on financial appointments, along with Anthony Scaramucci, founder and a co-managing partner of investment firm SkyBridge Capital and a co-anchor of the Fox Business show “Wall Street Week.”
Scaramucci, a staunch opponent of Labor’s fiduciary rule, has declared that the rule should be repealed.
Sen. Ron Johnson, R-Wis., head of the Senate Homeland Security and Governmental Affairs Committee, told Labor Secretary Thomas Perez in late November to halt implementing Labor’s “burdensome” fiduciary rule because it will likely be “undone” by the incoming Trump administration.
But industry officials doubt that outright repeal of the rule is likely, and are counseling advisors and broker-dealers to continue to get ready for the rule’s April compliance date.
Borzi refused to concede that the rule she spearheaded over six years was going to suffer defeat under a new administration. In a December speech in Washington, Borzi first refused to speculate on what the Trump administration might do about the fiduciary rule. She did say, however, that “the customer-first principle that’s embodied in this rule has already taken hold in the marketplace, and companies are not going back; they are going to continue to move in that direction. The speed at which they move may vary depending on what happens, but I’m not going to conclude that this rule is going away.”
CFA’s Roper said that the “biggest existential threat” to the DOL rule is from legislation that might be passed by the new, 115th Congress. Stopping any such legislation will require, she said, a “determined effort from Senate Democrats. Fortunately, we have some strong champions in the Senate.”