Immediate regulatory rollback may not be possible or even a White House priority, but simply hitting the brakes on fiduciary mandate is all it takes to let free market forces work.
David Gergen worked with four of the last nine presidential administrations, starting as a speech writer for Nixon and ending as a special advisor in the Clinton state department.
He doesn’t seem especially plugged into debates over professional duty that have circulated around the financial industry for decades. But he knows Washington, and he says Obama-era regulators have lost their shot at forcing a resolution.
“It’s doomed,” he told the advisors gathered at Envestnet’s recent summit in Dallas.
Gergen concedes that once a regulation is on the books, it’s difficult to eradicate it entirely. Bureaucrats don’t really conform to the rule of law so much as they live in a world of rules in themselves.
When those rules are enforced, they have teeth. But as he notes, Donald Trump’s executive order directs Labor Department enforcers to delay the fiduciary rule until June in order to digest a fresh round of comment letters and other debate.
After that point, a revised rule may emerge. Realistically, though, Gergen’s argument is that regulatory limbo can be functionally equivalent to taking the rule off the books entirely.
Day to day and month to month, aggrieved clients aren’t going to have an easy time logging actionable complaints that their advisors didn’t live up to DOL’s somewhat eccentric take on the fiduciary code.
As months stack up, the status quo gets harder to shake. After all, bureaucracy revolves around inertia.
Meanwhile, the White House buys time to focus on priorities that feed bigger headlines: progress on the Obamacare rollback opens the calendar for significant tax cuts, followed by an infrastructure bill and then, maybe, regulatory reform.
That timeline means formally revoking the fiduciary rule may not happen before around September, so we may see another executive order pushing back another 3-4 months.
In the meantime, the ongoing comment cycle should keep fans of the rule busy. Remember, the initial process of forcing the rule onto the books in the first place took years.
An indefinite delay to digest the latest round of industry response may be the best way to go this time. If a new standard for retirement advice is needed, it will be ready when it’s ready.
In that scenario, Congress can take its time. Gergen suspects Dodd-Frank goes first and I have a feeling the CFPB will feel the heat around that point.
Either way, it’s up to the marketers now. If the fiduciary crowd wants to expand their market share, they can take their message directly to prospects.
Efforts in that direction have been mixed at best over the last few decades, so we probably won’t watch the competitive ground move much now.