Fiduciary Rule and Its Effect on Financial Professionals—Part I: Origins

A fiduciary rule proposed by the U.S. Department of Labor (DOL) in 2010, has left the industry in flux ever since. With the goal of protecting consumers from conflicting financial advice, the rule has been in debate since 2016. It has been phased in, withdrawn, voted on, vetoed, reviewed, revised and, at present, left to individual states. This series will address the complexities of the rule and its effect on financial professionals.

Fiduciary Rule Origins

Since the early 2000s, state insurance regulators have overseen annuity sales to ensure consumers are sold products they actually need.

At some point, it was decided that additional regulations should be in place to protect the consumers and ensure advisors were truly acting in the best interests of their customers, rather than themselves.

The Obama Administration’s Timeline

In April 2016, the Obama Administration and the DOL broadened the definition of “fiduciary investment advice” under the federal Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC).

These regulations expanded the scope of who is considered a fiduciary to ERISA retirement plans and individual retirement accounts, including a broader set of insurance agents, brokers and insurers.

However, before the rule went into effect, eight industry groups filed a lawsuit against the DOL, claiming they did not have the authority to make such a rule.

On June 8, 2016, President Obama vetoed a Congressional attempt to block the rule. Congress tried to override the veto, but failed.

The rule was left in place while the Obama Administration transitioned to the Trump Administration.

The Trump Administration’s Timeline

Shortly into President Trump’s term, he ordered the DOL to review the rule and consider whether it harmed investors.

On March 15, 2018, the 5th U.S. Circuit Court of Appeals issued a decision removing the fiduciary rule, claiming it exceeded the agency’s authority. The DOL did not appeal the decision.

That might have been the end of it, if not for the U.S. Securities and Exchange Commission (SEC).

In April of 2018, the SEC released a new proposed rule package. All the while, individual states are taking the matter into their own hands, further complicating the issue and leaving professionals and consumers up in the air.


In Part II of this Fiduciary Series, we will address where exactly fiduciary rule stands now and individual state rulings.