The Fiduciary Standard is Here to Stay

The Fiduciary Standard is Here to Stay

The Department of Labor’s fiduciary rule has been unsuccessfully challenged in the courts in several instances, but the U.S. Court of Appeals for the Fifth Circuit recently struck down the rule.

Despite the Court’s decision, industry executives say the fiduciary standard is here to stay.

Most firms in the industry have made significant commitments in terms of time and money to meet the proposed fiduciary standard and remove any potential conflicts of interest lurking within their business models. Given the vast changes that have been made in the industry, any move backward at this point would be as difficult, if not more so, than continuing to adhere to new compliance procedures intended to remove conflicts of interest. However, the Department of Labor will not enforce the rule for the moment.

The head of Bank of America’s Merrill Lynch brokerage emphasized in a memo to the firm’s advisors that Merrill Lynch will continue to act in the best interests of clients. He also noted that the firm is favor of a best interest standard based on “clear and consistent rules, when advisors provide personalized investment advice to retail clients in any account.”

Other firms are echoing the sentiment, and executives throughout the industry believe that the DOL rule has brought attention to an important topic. Nonetheless, there’s a difference between company policies that require advisors to act in the best interests of their clients and a legal obligation for them to do so. Some industry experts believe that firms will change their approaches to serving clients while stopping short of apply the label of “fiduciary” to their activities.

However, the DOL rule, whatever its ultimate fate, has spurred a sea change in the industry and the fiduciary tide won’t be turned back.  

For more information, please read:
The Fiduciary Standard Has Already Been Set | Wealth Management

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