Labor Department's proposal for new fiduciary standard moves to comment period

The U.S. Department of Labor is moving full steam ahead with a proposed fiduciary standard for anyone giving retirement investment advice after years of retrenching, officials announced Tuesday.

The DOL sent its proposed rule to the Office of Management and Budget for regulatory review on Feb. 23, which typically can take up to 90 days. The proposed rule is now being released for a 75-day public comment period, followed by a public hearing and “even more public comment” after that, Labor Secretary Thomas Perez said on a news conference call Tuesday. He said the proposal was developed after “an exhaustive and robust outreach process. … I think it strains credibility to suggest that there is somehow an effort to rush the process.”

Jeffrey Zients, director of the National Economic Council, said on the conference call that a new fiduciary standard “is a central part of the president's middle-class economic agenda. That's why (we) are committed to getting rules in place.”

The proposed rule would require all financial advisers dealing with retirement savings to do so in their clients' best interests and to disclose any potential conflicts of interest. The proposal also calls for several prohibited transaction exemptions that would allow retirement advisers and service providers to continue arrangements like revenue sharing and fees.

A new “best interest” contract exemption would require advisers and firms to formally commit to put their clients’ best interests first. “This rule will simply codify with what they say they are already doing,” Mr. Perez said on the call. “This exemption is a vehicle through which we can install these guardrails for consumers while allowing flexibility for advisers.”

Hazel Bradford writes for Pensions & Investments, a sister publication of Business Insurance.