The
18-month delay of the Department of Labor's fiduciary rule will lead to more talk and more confusion, according to brokers and advisers.
"This [delay] is the stupidest thing I've ever heard, because the longer it goes on, the worse it is for consumers and my clients," said Frank Congemi, president and chief executive of Benefactor Financial.
Mr. Congemi, a broker who manages more than $100 million in client assets, is no fan of the DOL rule, but he is also no fan of the postponements that make it more difficult for financial intermediaries to adjust to whatever the ultimate fiduciary standard might be.
"Companies are already changing and creating new rules under the perception of a rule that hasn't even been enacted yet," he said.
Even though he believes the existence of the pending rule "is straining the relationships with all of my clients," Mr. Congemi is hopeful that the most recent delay "will allow people to discuss issues that haven't been discussed yet."
The first phase of implementation of the DOL rule, originally scheduled for April was postponed until June.
That delay, coupled with a
Trump administration that has not been a big supporter of the DOL rule, left some observers anticipating a delay of phase two, originally scheduled for January.
"I am not surprised, because there has been a lot of lobbying pushing for a postponement," said Susan Conrad, director of retirement plan advisers at Plancorp, a $3.6 billion advisory firm.
While Ms. Conrad could see the writing on the wall for a delay of phase two of the fiduciary rule, she admits to being "a little surprised it was 18 months."
At this point, she is trying to be optimistic that the time will be well spent on improving investor protections.
"One of my concerns is that the law will get watered down, so I'm hoping that in the 18-month period the Department of Labor tightens up the rule so that it is benefitting investors," she said. "It might depend on whether the SEC and DOL can come together and form one rule."
Paul Schatz, who manages $90 million as president of Heritage Capital Management, was also among those "absolutely not surprised it is getting delayed."
"My sense is that [President Donald J.] Trump was pressured by Republicans who don't want this rule passing at all," he added. "But, as an adviser who has always acted as a fiduciary, having it delayed helps my business because it helps differentiate me from the run-of-the-mill broker."
Even though the rule has now been delayed beyond the 2018 mid-term elections that could tilt power in favor of Democrats in Congress, Mr. Schatz thinks the DOL rule could be something that is never fully enacted.
"I don't think Trump really cares about the DOL rule one way or the other, but I think he's using it as a bargaining chip to get things done with Republicans," Mr. Schatz said. "My guess is they will keep on delaying the rule, but if the political winds shift, it's almost irrelevant what they do over the next 18 months."
While the latest delay might have been news to many, those paying close attention were already aware of the forces working against a January implementation of phase two.
Last month during an earnings conference call with analysts, the chief executive of broker-dealer
Stifel said the rule might be delayed indefinitely.
Ron Kruszewski cited a lack of support for the rule from the Trump administration as well as "a number of things that require further study."
Those favoring a delay of the rule
often cite the unintended consequences, such as brokerage firms reducing relationships with smaller accounts.
"I think the delay is prudent because people are starting to see the unintended consequences of the rule," said Mark Cortazzo, senior partner at Macro Consulting Group, which manages $850 million.
"The good news is the dialogue has made it into the mainstream, which is important, but the devil is in the details," he added. "Some of the best-intended programs can have negative consequences, and we're starting to see that. So, let's press the pause button and see if this rule is effective in accomplishing what we're trying to accomplish."
