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DOL Fiduciary News: February 10, 2017

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Labor Department to delay, revisit fiduciary rule – sources

Reuters; Thu Feb 9, 2017 | 7:06pm EST

NEW YORK -- The U.S. Labor Department is preparing to delay its controversial Obama-era fiduciary rule on financial advice for 180 days and seek public comment on the rule.

The agency has sent two separate documents to the Office of Management and Budget for approval, according to sources familiar with the agency's actions. One document is a proposed rulemaking that simply delays the regulation's effective date – now April 10 – for 180 days. That proposal has a comment period as short as 15 days.

The second document would start another round of public comment on the rule, which requires brokers and other financial advisers to put their clients' best interests first when advising them about individual retirement accounts or 401(k) retirement plans.

Dallas court approval of DOL fiduciary rule bolsters supporters' case

Investmnet News; Feb 9, 2017 @ 2:30 pm

A Dallas federal judge's decision on Wednesday to uphold the Labor Department's fiduciary rule buttresses supporters' efforts to prevent the Trump administration from overturning the rule.

“The DOL would be hard pressed logically to conclude now that the rule should not be implemented,” said Charles Field, a partner at Sanford Heisler.

The outcome in the Texas court was especially noteworthy because the plaintiffs chose that venue in part because the circuit has not been sympathetic toward Obama administration regulations.

“To see that a judge in Texas upheld the rule with a strong opinion is pretty powerful support for the rule,” Mr. Field added

Prudential to abide by current financial rules, despite Trump review

Reuters; Thu Feb 9, 2017 | 11:34am EST

Prudential Financial Inc will continue to follow current U.S. financial rules, despite reviews of those rules mandated by President Donald Trump's administration, the insurer's chairman and chief executive, John Strangfeld, said on Thursday.

The insurer "strongly supports" the administration's re-evaluation of the Dodd Frank financial reform law and a U.S. Labor Department Rule that requires financial advisers and securities brokers to act in clients' best interests when advising on retirement accounts.

LPL Financial Profit Surges as Fiduciary-Rule Preparation Continues

The Wall Street Journal; Feb. 9, 2017 6:45 p.m. ET

LPL Financial Holdings Inc. reported a 56% jump in fourth-quarter profit, as the brokerage firm’s multiyear transition from commissions to charging fees helped it top analysts’ expectations.

The Boston-based brokerage, which serves more than 14,000 independent brokers throughout the U.S., posted a net profit of $42 million, or 46 cents a share. That compares with $27 million, or 28 cents per share, in the year-earlier quarter.

...LPL has been shifting from relying on commissions tied to the sales of stocks, bonds and alternative investment products, such as annuities, to being a predominantly fee-based brokerage firm. LPL has lagged behind its bigger rivals in that transition, but the firm’s pace quickened in the fourth quarter.

DOL fiduciary rule class-actions costs could top $150M a year

InvestmentNews; Feb 9, 2017 @ 12:19 pm

Assuming the Department of Labor's fiduciary rule survives the river of legal and legislative challenges, the brokerage industry should expect to absorb between $70 million and $150 million annually in class-action litigation costs.

The price-tag range, calculated by Morningstar senior equity analyst Michael Wong, is on top of the $1.5 billion annual cost to the industry, as estimated by the DOL's regulatory impact analysis.

Because the rule, which is scheduled to take effect in April, opens the door for class-action lawsuits against firms selling commission-based products in retirement accounts under the best interest contract exemption (BICE), legal experts have been busy debating the full class-action potential.

How the Fiduciary-Rule Review Is Likely to Play Out

The Wall Street Journal; Feb. 9, 2017 12:17 p.m. ET

New retirement-savings rules set to take effect in two months are under threat after President Donald Trump’s order to review the regulation with an eye toward repealing or rescinding it, leaving the financial-advice industry guessing about next steps.

The fiduciary rule, due to take effect April 10, is meant to ensure that advisers who work with tax-advantaged retirement savings put clients’ interests ahead of their own. It is unpopular with Republicans and some in the financial industry who say it would harm consumers more than help by limiting investment options, elevating costs and potentially cutting off low-balance customers from some forms of professional advice.

Amid Threat to Fiduciary Rule, an Opening for a Uniform Standard?

The Wall Street Journal; Feb. 9, 2017 11:03 a.m. ET

Brokers and other retirement-advice givers say they embrace a fiduciary concept, just not the Labor Department’s.

The department’s fiduciary rule—which requires brokers and other advisers to minimize conflicts when giving retirement advice—has been beset with detractors since it was first proposed by the Obama administration six years ago. Now, after nearly a year of preparing for the broad regulation, the industry was put in limbo last week after President Donald Trump signed an executive action to begin the process of revising or rescinding the rule just two months ahead of implementation.

Mr. Trump’s action wasn’t forced by the brokerage industry, which had largely accepted the rule as law and had already spent hundreds of millions of dollars to prepare for its implementation in April. Instead, the rule’s latest challenge came from a new president intent on reducing regulation and from congressional Republicans who said it was too costly for Wall Street firms and would have cut off small retirement savers from investment advice.

Trump Can’t Stop the Retirement Revolution

Bloomberg Businessweek; February 9, 2017, 1:57 PM EST

Over the past decade, the way that millions of Americans invest for retirement has changed. Money has fled from many high-priced investment products. Companies that built their businesses on armies of commission-based salespeople are scrambling for cheaper ways to deliver advice. A 500-word memo signed on Feb. 3 by President Trump may slow this trend, but it’s unlikely to reverse it.

Trump ordered the U.S. Department of Labor to reconsider the fiduciary rule, a regulation set to go into effect in April. It requires financial advisers to put their clients’ interests first when handling retirement accounts. The U.S. retirement market is about $25 trillion in assets, the Investment Company Institute says, so the rule goes right to the heart of the advice business. Many on Wall Street hate it.

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