The Department of Labor fiduciary rule is a wild-card issue in the new Republican-led government, say several industry and Beltway sources.
Republicans have vocally opposed the rule and now control Congress and the White House. While the fiduciary rule should be on life support, several factors make that outcome less than obvious.
For starters, President-elect Donald Trump never mentioned the fiduciary rule during his 17-month campaign. But he did talk about the Affordable Care Act nearly every day.
Everyone in Washington is talking about plans and outcomes for reforming the ACA, a House source said. Conversely, there’s been little opposition to the DOL rule heard in recent months, the source added.
Absent a renewed lobbying push from opponents, it’s less likely the DOL rule will rise onto Trump’s radar. The president-elect has named Anthony Scaramucci an advisor on financial issues.
The New York financier and founder of SkyBridge Capital has said Trump will repeal the fiduciary rule. Scaramucci’s spokeswoman said he was travelling this week and unavailable for comment.
Overturning the DOL rule is a great unknown at this point, said longtime GOP strategist Frank Donatelli.
“All major Obama executive orders and rules will be up for scrutiny,” said Donatelli, former deputy chairman of the Republican National Committee. “(The) key will be the new DOL secretary."
Cabinet heads have a lot of input on administration strategy, especially on second- and third-tier issues.
The National Association of Insurance and Financial Advisors will continue lobbying for a better rule, said Diane R. Boyle, senior vice president for government relations.
Can Delay Rule
The fiduciary rule applies a “best interest” standard to anyone working with retirement accounts. It was published in April 2016 and begins taking effect April 2017.
Trump can delay the effective date, a tactic Obama employed to pause impending regulations written by the President George W. Bush administration.
Of the three ways the administration can erase the rule, legislation seems most likely. Still, it will be difficult since Republicans do not have a filibuster-proof majority in the Senate.
Opponents gained a key ally in earlier this year when House Speaker Paul Ryan, R-Wis., came out against the DOL rule. Ryan has been silent on the rule since the election, but a spokeswoman told The Wall Street Journal this week that the speaker is having discussions on strategy with the Trump transition team.
Sen. Elizabeth Warren is a formidable opponent to repeal. Financial reform issues are at the top of Warren’s list, making it likely she would employ the filibuster maneuver.
While there is little momentum for repeal legislation before the end of the year, the House source said Republicans might want to “take a victory lap” by taking aim at Obama’s financial regulations.
House Republicans have Finance Committee-approved legislation ready to go, gutting both the fiduciary rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Of course, Obama would veto the bill, but it could be re-introduced next year.
Republicans could slip fiduciary rule repeal language into a reconciliation bill sometime next year, the House source said. Reconciliation bills only require a simple majority to pass and cannot be filibustered.
Even if the rule is repealed, it is unclear how it will affect an industry well down the road to compliance. Government agencies have long been effective at forcing a change in business practice that remains in place long after the related rules have been scrubbed by opponents.
“Most companies still need to move forward with preparing their business for the rule,” said Jamie Hopkins, associate professor at The American College of Financial Services. “If a company fails to comply in April, it could result in a tremendous amount of fines and litigation costs, even if the Trump Administration later lifts the rule.”
Non-compliance “could basically shut down a company,” he added.
A leading Democratic strategist predicted the fiduciary rule is going to be killed. No matter what happens, the Trump victory is a victory for financial services, added Michael Lewan, former chief of staff to Sen. Joseph Lieberman, D-Conn.
“If I were selling retirement products right now, even if I weren’t a Trump supporter for other reasons," he said, "I would be happy that the Republicans were back in charge."
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]
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