Securities Industry to DOL on Fiduciary: We’re Perfect, Leave us Alone

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On October 31, the Department of Labor (DOL) proposed a new definition for an investment advice fiduciary. This proposal includes holding advisors, brokers and insurance agents to the fiduciary standard when consumers “rollover” their funds from a 401(k) to an IRA.

This is the third attempt by the DOL to enforce fiduciary advice. It tried in 2010 and 2016. The 2010 attempt was thwarted by the securities industry and the proposal was withdrawn by the DOL, and the 2016 attempt could not withstand legal challenges.

Will fiduciary advocates follow the same strategy used in the past or adopt new tactics?

Will history repeat in 2023?

This proposal is different, however. Its scope is narrower than the 2016 rule. It also applies the legal reasoning of law professor Arthur Laby to include rollover recommendations. If you say you offer trusted advice, according to Laby, you should be held to it.

The proposal is part of President Biden’s efforts to minimize “junk fees” charged to consumers.