On February 3, 2017, the Trump administration issued a memorandum (a formal statement) questioning whether the Department of Labor (DOL) should impose a fiduciary duty on financial managers of certain types of retirement plans, such as 401ks and IRAs. The rule will go into effect on April 1, 2017.
A fiduciary duty requires an individual in a position of trust to be truthful, adhere to a duty of loyalty, and act in the client’s best interests. A fiduciary must put a customer’s needs ahead of the fiduciary’s personal financial interests. (For more information, see What Is a Fiduciary Duty?)
In its memorandum, the administration directs the DOL to revisit its rulemaking process. Specifically, the DOL is to determine whether instead of protecting the public, the fiduciary rule might actually “...adversely affect the ability of Americans to gain access to retirement information and financial advice.” The Trump administration’s stated concern is that holding a manager to the high fiduciary standard might:
…significantly alter the manner in which Americans can receive financial advice, and may not be consistent with the policies of my Administration.
In effect, the DOL must reevaluate its position and determine whether the higher fiduciary standard would decrease the availability of financial managers to the public. The memorandum failed to acknowledge the potential value of the DOL rule—that of protecting retirement funds from unscrupulous managers.
It’s notable that the administration outlined its economic goals in its February 3, 2017, executive order. After it receives and reviews the DOL’s response, one would expect that the Trump administration would find that imposing a fiduciary obligation on financial managers would align well with its first stated goal of empowering citizens to make independent and informed financial choices, to save for retirement, and to increase wealth.