It appears that with the DOL declining to appeal rulings against the proposed rule, it will pass away and leave the financial industry waiting to learn about the next rule(s) from various sources. Of course, a rule which created its own different definition of fiduciary, unlike the existing rule for registered investment advisers, and exceeded the authority of the DOL by purporting to apply the rule to IRAs (which are outside its purview) was probably going to run into trouble sooner or later. Perhaps the current situation means no further taxpayer money will be wasted on the previous DOL approach.
However, it seems pretty obvious that protections for investors, which protections specifically require the myriad different sellers of financial products to place the interest of their clients ahead of those of the industry is not only a good idea but one whose time has definitely come. Some value can be taken from the efforts of the DOL, particularly in terms of how the proposed rule heightened consciousness about some of the abuses in the industry and the need to address them. Some firms have made progress towards better serving clients and their interests and much of that progress should remain in place.
The current effort of the SEC with its so-called best interest rule is also a small step in the right direction but not enough for the protection investors deserve. More importantly, DOL or no, the insurance industry needs to get on board with the concept of serving clients instead of what we so often see today and it appears a strict best interest rule – whether we call it fiduciary or not – is the right way to go. Consistency across the various industry players is critical to ensuring that investor’s interests are served and the lack of a single controlling rule is a problem that needs to be addressed. Just because one type of advisor – the registered investment adviser – is held to a fiduciary standard doesn’t mean that investors are protected since other groups (insurance sellers, brokers, etc.) do not employ that level of protection and want to keep that “advantage” over their customers.
So, if it got the ball rolling, then we probably needed the impetus the DOL rule provided, even if that was not the ultimate resolution of the issue.