As the clock ticks down, the fiduciary rule seems increasingly likely to go into effect. This morning, Secretary Acosta dropped a surprising op-ed in the Wall Street Journal announcing that he would not delay the fiduciary rule’s implementation because Labor’s review has “found no principled legal basis” to delay the rule’s effective date. The op-ed reads almost as a civics lesson. Acosta pledges “respect for the rule of law” and explains how the notice and comment procedure limits the ability of administrative agencies to regulate on whims.
This does not mean that the fiduciary fight is finished. The op-ed promises to reopen public comment on the rule and consider the issue yet again. Acosta explains that the administration has “respect for the individual” and “presumes that Americans can be trusted to decide for themselves what is best for them.” In the financial advice context, the argument makes little sense. If a retirement saver knew what was best for him, he would not need a financial adviser. We seek out advice when we do not know how to act in our own best interest. A paean to freedom of contract here amounts to a defense of the freedom to fleece and to be fleeced.
In a way, this development looks like a blown play from the administration. The Trump team may have assumed that its initial sixty-day delay opened a sufficient window for Congress to kill the rule, leaving the President’s hands cleaner. This outcome seems particularly surprising given the Trump team’s general opposition. Anthony Scaramucci compared the fiduciary rule to Dred Scott–contending that the rule discriminated against financial advisers. Gary Cohn argued that the rule should be scrapped because it was “like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.”
In any event, the rule does not prevent retirement savers from making unwise investments. It simply limits the ability of financial advisers to steer clients toward poor choices that generate more profits for the financial adviser.
Posted by Benjamin P. Edwards on May 23, 2017 at 04:30 PM