The Fifth Circuit officially vacated the Department of Labor (DOL) fiduciary rule as of June, 2018, although the opinion that spelled the rule's demise was issued in March. As most know, the DOL fiduciary rule imposed a mandate upon most advisors that would have required them to act in the best interests of their clients, including disclosing any conflicts of interests that any given transaction may have created.
The rule also required many advisors to disclose their fiduciary status to clients, and to accept only reasonable compensation for advisory services relating to sales of certain financial products, recommendations regarding rollover transactions and retirement account investment decisions. At the firm level, the rule required financial firms to implement written policies and procedures designed to mitigate the impact of conflicts of interests.
We asked Professors Robert Bloink and William Byrnes, who are affiliated with ALM's Tax Facts, and hold opposing political viewpoints, to share their opinions on the rise and fall of the DOL fiduciary rule.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Byrnes: The Fifth Circuit opinion echoed what everyone in the financial services industry has been saying about the rule since it was introduced. It was an incredible overreach by the DOL, and subjected an entirely new class of advisors to a heightened fiduciary standard with respect to clients that these advisors may have had minimal interaction with. Selling a single annuity product to a client should not mean that the advisor is now a fiduciary with respect to that client, which I believe was one of the court's primary problems with the rule.