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CFP Board, other fiduciary advocates prep for fight to save DoL rule

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Anticipating the Trump administration could derail the Department of Labor's contentious fiduciary rule, groups like the CFP Board are adopting a defensive strategy: focus on preserving investor protections from the previous administration, rather than championing new regulations.

"Top of the list here is of course supporting and defending the DoL fiduciary rule," says Maureen Thompson, the CFP Board's vice president of public policy.

The DoL's fiduciary rule is widely expected to be a target of the Trump administration, which in early activity has taken steps to curtail regulations it deems harmful to business and economic growth.

Despite the rule already being on the books with an initial compliance date of April 10, there was industry speculation Wednesday morning the White House was readying an executive order to delay it.

Multiple sources who have been involved in the debate over the regulation say they understand that an executive order delaying the rule is under consideration, though the timing remains unclear.

A White House spokesman did not immediately respond to a request for comment on any potential executive order.

One source suggested that the White House might hold off on the order, waiting to see if President Trump's pick to head the Labor Department, Andy Puzder, wins Senate approval. His confirmation hearings have been delayed several times thus far as the nominee compiles his ethics disclosure paperwork.

Sources say that any White House action would likely direct the Labor Department to delay implementation of the fiduciary rule for a period of time — likely six months — while the various legal challenges to the regulation work their way through court. At that time, the DoL could then reopen the matter for a notice-and-comment period, after which it could determine whether to revise or repeal the rule altogether.

However, some experts observe that, since the rule is already on the books, amending or repealing the rule will initiate a new series of procedural hurdles.

"[D]oing so will likely take additional rulemaking because the rule was actually enacted — as opposed to simply stating the rule is dead — which will take additional comment periods," says Brendan McGarry, an attorney with the law firm Kaufman Dolowich & Voluck, who represents RIAs and other financial professionals in litigation and regulatory affairs.

"You can't just say we're tossing out this rule," the CFP Board's Thompson says.

But whether a White House order comes out this week, next month or not at all, investor-protection advocates are girding for a fight to preserve the fiduciary rule either at the Labor Department or on Capitol Hill. Already in the new congress, Rep. Joe Wilson (R-S.C.) has introduced legislation that would impose a two-year delay on implementing the DoL rule.

Thompson says she anticipates that Rep. Ann Wagner (R-Mo.) could revive legislation she backed in the last Congress that would direct the Labor Department to delay its rule until the SEC completed its own work on a separate fiduciary rulemaking — a distant prospect at a five-person agency with two empty commissioner seats and an as-yet unconfirmed chairman who, once in office, is not expected to race toward new rulemakings.

"Our concern is that a delay would effectively kill the rule," Thompson says.

A spokeswoman for Wagner did not respond to messages seeking comment on plans to revive the Retail Investor Protection Act, which passed the House in 2015 but stalled in the Senate.

For now, the fiduciary rule is the law of the land, and with the first implementation date fast approaching, advisers, brokers and others covered by the regulation have been retooling their compliance programs, and, in the case of the many firms that have been revisiting how they handle commission-based retirement accounts, upending their business practices.

"What we've been telling members is, unless and until it's actually delayed, the prudent thing to do would be to treat it as if it's going into effect," says Bob Grohowski, general counsel at the Investment Adviser Association.

"Our concern is that a delay would effectively kill the rule."

Thompson and other advocates are planning to make support of the DoL rule a centerpiece of their advocacy on Capitol Hill, where they will be shopping around a message that the early evidence suggests that financial services firms have been absorbing the fiduciary regulation and have not generally been cutting services or hiking fees.

"I think we do have a good story to tell," Thompson says.

Barbara Roper, director of investor protection at the Consumer Federation of America, agreed.

"Costs of both investment products and investment advice are dropping, the toxic incentives that encourage and reward harmful advice are being eliminated, and small savers are getting more choice — not less — about how to pay for advice," she says. "All thanks to changes firms are making to comply with the rule."

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