President Trump signed a memorandum Friday to delay — and potentially cancel — a sweeping federal rule that would impose new responsibilities on financial advisers, a move guaranteed to provoke heated objections from consumer advocates and liberal lawmakers.
The memorandum targets the Department of Labor’s fiduciary rule that, when it begins to phase in April 10, would elevate all financial professionals dealing with retirement plans to the level of fiduciary, with increased ethics and legal duties that could effect the retirement accounts they offered and their relationship with clients.
The Trump administration, siding with the financial services industry, said the rule will force advisers to limit the investment choices offered to clients.
“We think this was a complete miss on what they were trying to do. It has completely unintended consequences,” a senior White House official said. “It took away a huge amount of investment options.”
Supporters of the fiduciary rule argue that it protects consumers by requiring commission-based brokers and insurance agents to disclose conflicts of interest and forcing them to recommend the lowest cost 401(k) plans, individual retirement accounts or other retirement savings plans.
The rule would affect more than $3 trillion of retirement assets in the U.S.
Former President Barack Obama’s administration estimated it would protect consumers who lose an estimated $17 billion a year from retirement investments due to advisor conflicts of interest.
The Trump memorandum directs the labor secretary to delay implementation of the rule, review it and propose further action.
“They might determine that it is completely unnecessary,” the official said.
Mr. Trump also is expected to sign an executive order for a re-examination of the Dodd-Frank Wall Street Reform Act and its Volcker Rule that restricts banks from making certain speculative investments.
The order directs the treasury secretary to consult with regulatory agencies about possible changes to the laws and to report back to the president with recommendations, according to the White House
The White House official described the Dodd-Frank law as a “massive overreach” that imposed burdensome red tape on banks while failing to address the worst problems related to the 2007 financial crisis. Those unaddressed problems included too-big-to-fail banks, taxpayer bailouts and government-sponsored enterprise (GSE) such as Fannie Mae and Freddie Mac, the official said.
It would take an act of Congress to repeal or significantly alter Dodd-Frank. The administration instead is looking for ways to loosen or tweak the regulatory requirements.
“This is not an attempt to undo Dodd-Frank,” the official said. “There are quite a few things we can do on Dodd-Frank and Volcker Rule that we think will have a significant impact.”