Delay in Fiduciary Rule Implementation Causing Issues

September 26, 2017

Delay in Fiduciary Rule Implementation Causing Issues

September 25, 2017 | Luke Schmidt | Blue Vault

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The proposed delay in the implementation of the Labor Department’s fiduciary rule has created some issues that could hinder the financial services industry. This is due to the fact that multistate brokers and financial advisors may be forced to deal with different state guidelines, with each state having a different definition of who qualifies as a fiduciary. The issue has begun in Nevada, which in April passed a law expanding its definition of which financial service professionals are fiduciaries and what exactly their responsibilities are to clients. After going into effect July 1, critics and industry professionals are beginning to complain that it conflicts with ERISA and SEC rules.

The new Nevada law defines broker-dealers and registered investment advisors, who previously were excluded from state law, as fiduciaries with fiduciary responsibilities to their clients. Nevada has joined four other states that impose these responsibilities on broker dealers. California, Missouri, South Carolina, and South Dakota currently maintain these standards; however, these responsibilities were imposed through case law, not legislation. If the Trump administration revokes or changes the Department of Labor rules, other states may choose to pass similar legislation, further impacting the industry.

While the Nevada law applies to all accounts, the Department of Labor proposed legislation relates only to investment advice in retirement accounts. Regarding the Nevada law, it will take time before the true impact can be determined, as regulations will need to define what practices and course of business constitute violations. With the potential for many diverse state fiduciary laws, those opposed to the DOL legislation may begin to reconsider their stance before their lives become much more complicated.



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Loreen M. Gilbert, CIMA, AIF, CRC, CLTC – President, WealthWise Financial Services
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