The Labor Department's fiduciary rule is one step closer to completion, with the White House Office of Management and Budget wrapping up its review this week.
OMB's regulatory review ended on April 10, according to federal records. White House met with supporters and opponents of the rule starting in late Marchincluding the CFP Board and AARP.
This week, OMB officials met with representatives from the Insured Retirement Institute (IRI), the American Council of Life Insurers (ACLI), the American Chamber of Commerce, Finland and the Financial Services Institute (FSI), among others. , who have expressed opposition to the DOL's latest iteration of a fiduciary standard.
The DOL unveiled the new rule last October, with President Joe Biden framing it as a way to curb so-called “junk fees” in the form of high and potentially inappropriate commissions in the retirement advice space. DOL then conducted a 60-day public comment period, including a two-day public hearing in December, before the final proposal reached OMB.
Previous Labor departments have attempted fiduciary rules, including a Trump-era version that was dead on arrival when the Biden administration took over. Additionally, the Fifth Circuit Court of Appeals in Texas vacated an Obama-era version.
Supporters argue the new rule addresses Fifth Circuit concerns, including a requirement that firms sign a “best interest” contract mandated in the Obama-era iteration, which is not included in the newer proposal.
However, critics such as Bradford Campbell, a partner with the law firm Faegre Drinker and former DOL executive under President George W. Bush, argued that the new DOL rule gives “family to the Fifth Circuit's reasoning” without addressing actually concerns.
It is difficult to predict when the rule will be released, according to IRI spokesman Dan Zielinski, who noted that the DOL's proposed rule came seven to 10 days after OMB included its initial meetings. If OMB recommends that the agency make adjustments, that could delay the issuance of the final rule, but without any recommendations, it could “come much sooner,” he said.
According to IRI, OMB is scheduled to meet with several other groups until April 15.
Meanwhile, 55 Democrats in the U.S. House of Representatives, including Rep. Maxine Waters (D-Calif.), the ranking Democrat on the House Financial Services Committee, reiterated their support for the DOL rule in a letter to OMB, asking them to expedite the review process.
In the letter, the signatories say they have “long sounded the alarm” for stronger rules to protect retirees and noted that significant gaps remain in the DOL's regulatory framework. They argued that the DOL's new rule “closes these loopholes once and for all.”
“We believe a strong DOL rule will have a tremendous impact on moderate-income and working families, who are typically only able to save for retirement in small amounts and need all of help they can get to protect their nest eggs from financial professionals who seek to abuse their trust,” the letter said.
IN a hearing in January analyzing the rule, Rep. Brad Sherman (D-Calif.), the ranking Democrat on the House Capital Markets Subcommittee, stressed that more clarification on the rule was needed, including whether so-called “pick me” discussions (when an adviser tries persuade a client to hire them) fall below the fiduciary standard.
Sherman also criticized the “extraordinary balkanization” of regulations protecting investors, with oversight divided among three congressional committees and three government agencies (DOL, Securities and Exchange Commission, and Treasury Department).