Brokerage firms and financial professionals working in the retirement industry have been preparing for the implementation of the fiduciary rule for more than a year. Now, it may not happen.

On February 3, President Donald Trump signed a memorandum ordering the Secretary of the Department of Labor (DOL) to complete an extensive review of the fiduciary rule, stating it “may significantly alter the manner in which Americans can receive financial advice, and may not be consistent with the policies of my Administration.”

On February 3, President Trump signed a memo ordering the DOL’s Secretary to review the fiduciary rule.

What’s the future hold for this influential piece of legislation and those whom it will affect? Let’s take a look.

What is the Fiduciary Rule?

The fiduciary rule is an amendment to the Employee Retirement Income Security Act (ERISA) scheduled to be phased in beginning April 10 with full implementation by the beginning of next year. It requires all advisors who offer retirement planning advice or work with retirement plans to follow a “fiduciary” standard.

Currently, the ERISA only holds advisors who deliver guidance about or work with 401(k) plans accountable to a fiduciary standard; it holds advisors who deliver direction or work with other retirement accounts, including IRAs and employer retirement plans, accountable to a lower “suitability” standard.

To meet the fiduciary standard, advisors must act in their clients’ best interests. In doing so, they’re obliged to provide accurate, comprehensive counsel, be transparent about any commissions and fees, avoid and disclose possible conflicts of interests, and provide recommendations that abide by the goals, objectives, and risk tolerance of their clients. Meeting the suitability standard only mandates that advisors follow the last item in that list.

In essence, the fiduciary rule aims to discourage advisors from selling retirees investment products that give the advisor high sales commissions, but aren’t a client’s best option. Its opponents believe it makes advisors too vulnerable to lawsuits.

Is Its Effective Date Delayed?

No, the fiduciary rule’s effective date has not been delayed… yet.

Before Trump’s signing ceremony, some news outlets reported a draft of the memo postponed the rule from taking effect 180 days and ordered the DOL and Department of Justice to work together to stay litigation relating to the rule. These directives are not present in the final memo.

No, the fiduciary rule’s effective date has not been delayed… yet.

Instead, the Trump administration has left it up to the Secretary of Labor to decide the amendment’s fate. The memo states, “If you make an affirmative determination as to any of the considerations identified in subsection (a) or if you conclude for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with the priority identified earlier in this memorandum then you shall publish for notice and comment a proposed rule rescinding or revising the Rule, as appropriate and as consistent with law.”

With Trump’s nominee for Secretary of Labor, Andrew Puzder, still unconfirmed, only time will tell if we’ll see the rule delayed. It’s possible Acting Labor Secretary Edward Hugler will seek to postpone the rule’s effective date to complete its review.

How Should Advisors Proceed?

Advisors should continue planning to work under a fiduciary standard, even if the DOL delays or rescinds the fiduciary ruling.

Several firms have stated that they’re ready or still gearing up to meet the rule’s compliance date. Additionally, as one expert expressed, the industry has already been on its way toward adopting a fiduciary standard of service, regardless of the rule.

More and more investors are demanding their advisors act in the investor’s best interest, so those who don’t follow a fiduciary standard may soon find themselves with less work. When you help retirees with their investments, be sure to fully research their options, divulge all relevant information, and recommend the product that best fits their needs. If you want prospects to trust you, honesty truly is the best policy.