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What now for the DOL â€œfiduciary ruleâ€ that takes effect this coming April?
If you want to make a dentist’s eyes glaze over, just try mentioning somewhat obscure executive branch rule-making. But the simple truth is that the president-elect is likely to attempt to reverse or revise several policies and procedures set in motion by the current administration.
For the remainder of the year, we’ll be looking at the possible implications of a Donald Trump presidency, particularly as they may affect dentists as professionals and investors. Today, let’s consider what the election result may mean for legislation passed earlier this year and summarized here: the Department of Labor’s (DOL) “conflict of interest” rule.
In short, the rule was designed to strengthen protections for investors by requiring that registered investment advisors and other persons act solely in the best interests of their customers in making investment recommendations—avoiding conflicts of interests and operating with full transparency.
What happens now?
The President-elect hasn’t spoken directly about the DOL rule, so it’s not entirely certain whether or not the rule could be reversed, modified, or perhaps simply delayed. In fact, financial services firms likely to be affected most heavily by the rule are proceeding full steam ahead as if the rule’s provisions will in fact take place, as scheduled in April 2017 for some aspects of rule and by January 1, 2018 for full implementation.
But the rule itself is considered “industry-unfriendly,” so there is always the possibility that it will look different 6 months from now.
Why this matters to you as an investor
If the rule stays intact, investors may see some differences in how they work with advisors and the kinds of investment vehicles—and advice—offered to them. For example, the new rule as written includes significant enhancements to disclosure requirements, which means investment advisors will have to adjust their business models. Many transactions that used to be simple and straightforward will now come with a heap of disclosure documents investors will have to look through and sign. Certain products, such as variable annuities, may become too costly for advisors to profitably sell, due to the reductions in fees many will likely see and the increases in disclosure requirements. This may mean advisors simply won’t work as closely with investors of modest means, as the profit margin in doing so will now be lower. This may not affect dentists as much as lower earners, but it could.
There are no actions for investors to take now. But you’ll want to stay tuned for news about the impact of the rule. Beyond just your status as an investor, how the new administration handles the rule may be an indicator of how President Trump will try to tackle larger fish that could impact your practice, such as the Affordable Care Act, which Trump has vowed to dismantle.
Photo courtesy of Gage Skidmore.