Vanguard is “very pleased” that the Labor Department is proposing to delay full compliance with the fiduciary rule for retirement accounts until July 2019, according to a statement emailed to ThinkAdvisor.
The CFP Board of Standards is not. It’s disappointed with the delay, which is “unnecessary” because the rule as is was “well thought out and well reasoned based on extensive input from all stakeholders,” says Maureen Thompson, its vice president of public policy.
These are just a couple of the reactions to the decision the Labor Department disclosed Wednesday in filings in a court case challenging the rule.
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In addition to delaying full compliance for 18 months, from Jan. 1, 2018 to July 1, 2019, the Labor Department is considering relaxing the rule’s restrictions on certain transactions, including the sale of some insurance products, presumably including variable annuities, and IRA rollovers from 401(k) plans, and the requirements for a best-interest contract exemption (BICE), which would allow such transactions.
The agency has filed proposed amendments for those three exemptions with the Office of Management and Budget, but no details are available yet, which is creating uncertainty for financial firms.
“There’s no question that the uncertainty makes it difficult for firms to prepare and raises the questions about whether all the hard work done to comply and modernize systems will pay off,” says Aron Szapiro, director of policy research at Morningstar.
For investors — and advisors — there’s also the question about enforcement of the rule if the BICE is watered down eventually or replaced with some other mechanism.