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NEW YORK (Reuters) – The U.S. Department of Labor issued an 18-month-delay on Monday for key parts of its retirement rule, including one that would require brokers to ask clients if they feel that accounts that charge commissions are in their best interests.
The Labor Department said the delay would give it time to review public comments received in recent months and to satisfy President Donald Trump’s request in February that it review the cost the rule poses to the wealth management industry and investors.
The so-called fiduciary rule took partial effect this past summer, requiring securities brokers at firms like Morgan Stanley and Edward Jones to charge reasonable fees, make no misleading statements and to do what is in a retirement saver’s best interest.
The parts of the rule now delayed until July 1, 2019, are provisions that articulate what brokers must do to follow those guidelines. Those provisions also could create the basis for a claim if a client believes the broker did not do what is in his or her best interest.
Consumer advocates fear the delay is a sign that the thorniest parts of the rule will eventually be scrapped.
“The mechanisms that make this rule enforceable in the marketplace are delayed, and the signal from the Department of Labor is that (those provisions) are on the chopping block long term,” said Barbara Roper, investor protection director for the Consumer Federation of America.
The Obama administration crafted the rule in 2016 to eliminate conflicts of interest in the financial advice that savers receive on retirement accounts. The original version of the rule limited brokers’ ability to earn commissions and sell some higher-fee products.
Wall Street lobbyists have argued the best-interest contracts and the principal transactions exemption, also subject to the delay, will reduce the number of investment products brokers can offer to retirement savers.
They say it will also drive up compliance costs and thereby fees, forcing firms to drop less profitable investors and small-business 401(k) clients.
“This delay will allow the DOL to conduct a thorough review of the rule…to ensure investor choice and access to retirement savings advice is protected,” said Dale Brown, president of the Financial Services Institute.
Reporting by Elizabeth Dilts; Editing by Peter Cooney