The Department of Labor's long-awaited final fiduciary rule "ensures that putting clients first is no longer a marketing slogan, it's the law," Labor Secretary Thomas Perez told reporters on a Tuesday afternoon call to announce completion of DOL's rule to amend the definition of fiduciary on retirement advice.
"With the finalization of this rule, we are putting in place a fundamental protection into the American retirement landscape," Perez said. "A consumer's best interest must now come before an advisor's financial interest. This is a huge win for the middle class."
After nearly six years of reworking the rule based on extensive and "invaluable" public feedback from consumer groups and stakeholders, Perez told reporters that DOL has "streamlined" and clarified its conflict of interest rule — including the controversial Best Interest Contract Exemption (BICE), the disclosure provisions, proprietary products and treatment of products like annuities, as well as commissions.
"We listened, we learned, we adjusted," he said, "and you'll find that in the final rule."
As part of the overhaul, DOL has also lengthened the compliance timeline under the rule to one year from the original eight months, Perez said, and "phased in the implementation so firms will have until Jan. 1, 2018" to come into full compliance.
The final rule and exemptions adopt a "phased" implementation approach. One year after the rule's publication, in April 2017, the "broader definition of fiduciary will take effect, but to take advantage of the BIC exemption, firms will only be required to comply with more limited conditions, including acknowledging their fiduciary status, adhering to the best interest standard, and making basic disclosures of conflicts of interest," DOL states in a fact sheet released Tuesday detailing some of the final rule's changes.
The other requirements of the exemption will only go into full effect on Jan. 1, 2018.
(Check out complete coverage of the DOL fiduciary rule on ThinkAdvisor.)
Now that the rule is completed, DOL's focus is "shifting to working collaboratively with all stakeholders to ensure compliance," Perez said, adding that over the next 18 months DOL "will be fanning out to address questions, concerns and help facilitate compliance."
Perez along with White House National Economic Council Director Jeffrey Zients, Sen. Elizabeth Warren, D-Mass., and other lawmakers will publicly announce the final rule at an event scheduled for Wednesday at the Center for American Progress in Washington.
The rule will appear on public inspection at the Federal Register Wednesday morning.
Zients noted on the Tuesday afternoon call that a little over a year ago President Barack Obama "called for action to crack down on conflicts of interest in retirement advice, which costs American families billions of dollars every year." Today, he continued, "we've reached a major milestone — the Department of Labor has finalized crucial protections for middle class Americans' retirement savings."
Zients noted that DOL's final rule "incorporates feedback, helps to streamline and clarify the proposal, to minimize the compliance burden and ensure continued access to good advice, while at the same time maintaining an enforceable best interest standard."
These new rules, he continued, "will level the playing field so that retirement advisors will compete based on the quality of advice that they give."
He acknowledged, however, that "powerful interests" remained aligned against DOL, "insisting that the only good rule is no rule at all."
Zients repeated a message that the president delivered last year: "If your business model rests on bilking hardworking Americans out of their retirement money, then you shouldn't be in business."
The president, he said, "will continue to fight to protect this new rule."
Indeed, lawsuits are already said to be in the works and could be filed immediately after the rule's release.
