By Dr. Jonathan Tiemann, February 11, 2017

On Friday, February 3, 2017, a group of business leaders convened at the White House with the President, members of his family, and his ever-watchful Vice President, presumably to lobby for policies conducive to the profitability of their businesses. The financial markets advanced, as though relieved that the President had chosen to take a break from erecting immigration and trade barriers, which most of the industrialists and financiers oppose, to concentrate on their agenda. Wall Street seems to take for granted that that agenda includes massive tax cuts for corporations and wealthy individuals, along with rollbacks of regulations they regard as either costly or annoying.

In remarks earlier in the week, the President had promised to “do a number on Dodd-Frank,” presumably meaning that he intended to spearhead a drive to roll back some large portion of the banking and financial services regulations the Government has imposed under the Dodd-Frank financial reform law, which Congress enacted in 2010 as a response to the economic peril and dislocation of the financial crisis of 2007-2009. The President mused during his Friday meeting that many of his friends had complained they couldn’t expand their businesses because they can’t get banks to lend them the money they need, because of Dodd-Frank.

While Dodd-Frank is of interest to a broad range of financial services firms and customers, the brokerage industry has also been lobbying the Administration to take action to weaken the so-called “Fiduciary Rule,” a newly-enacted Labor Department rule requiring that anyone providing financial advice to a retirement plan — which usually means a pension plan, 401(k), or IRA — must adhere to a fiduciary standard.

Brokers don’t like the fiduciary rule primarily because it holds them to a higher standard of care — that of fiduciaries, who have an affirmative obligation to put their customer’s interests ahead of their own — rather than the weaker, “suitability” standard under which they have historically operated. Suitability merely requires that the broker refrain from selling investors products that are unsuitable, which usually means making sure that the products don’t have an inappropriate risk profile. The suitability standard leaves brokers free, however, to sell customers products that involve high sales commissions, even where similar, more cost-effective choices are available. A fiduciary standard makes the sale of such products much harder to justify.

After his meeting with financial industry leaders the President signed two executive actions apparently intended to give the sense that he was initiating his rollback of financial regulation. As the New York Times[1] reports:

The executive order affecting Dodd-Frank is vague in its wording and expansive in its reach. It never mentions the law by name, instead laying out “core principles” for regulations that include empowering American investors and enhancing the competitiveness of American companies. Even so, it gives the Treasury the authority to restructure major provisions of Dodd-Frank, and it directs the Treasury Secretary to make sure existing laws align with Administration goals.

Mr. Trump’s action on the fiduciary rule, which Democrats and consumer groups immediately denounced as a gift to Wall Street, could have a more concrete impact. His memorandum directs the Labor Department to review whether the rule may “adversely affect” investors’ ability to access financial advice — and if it does, it authorizes the agency to rescind and revise the rule.

The action on Dodd-Frank appears largely symbolic, since any major overhaul of regulatory authority under that law would require Congressional action. Regulatory agencies could slow-walk any new rule making, and they could in theory adopt a more desultory approach to enforcing existing rules, but changing existing rules without changing the law would involve the whole time-consuming process of rule making, including the publication of draft rules, a public comment period, and finalization. The same issue also affects any effort by the Administration to derail the fiduciary rule, which was finalized last fall and is due to take effect early in April.

Despite the hurdles preventing any quick action on the fiduciary rule, many in the brokerage industry were quick to express their enthusiasm for the President’s order. Investment News reports[2]

“It is clear they want to scuttle this thing and make it right,” said Jill Hoffman, vice president for investment management at the Financial Services Roundtable. “We consider this a win and we’ll work out the other details. We have clear signals there will be changes to the rule.”

The brokerage industry fought to prevent the adoption of the fiduciary rule, and pursued legal action, unsuccessful to date, to invalidate it since its adoption.

Old School Brokers

Their response to the President’s executive memorandum signals their eagerness to see the rule’s requirements relaxed. The brokers’ eagerness to celebrate the President’s order amounts to a public admission that they prefer a “Me First” approach to their business.

Retirement investors — and all investors, actually — do have the ability to make sure that their investment advisor is subject to the fiduciary standard. By choosing a Registered Investment Advisor (an RIA, such as Tiemann Investment Advisors, LLC) they can assure that they have engaged an advisor that must adhere to the fiduciary standard in providing investment advice. For an RIA, that standard applies to all investors, not just retirement investors. An RIA that observed only the weaker suitability standard would be subject to a variety of regulatory sanctions.

Brokerage industry representatives argue that the fiduciary rule would limit consumer choice, while proponents (including me) point out that the choices the standard would eliminate are mostly the ones that are overpriced anyway. Or, as Charles Pierce, who usually takes a snarkily saturnine view of such matters, puts it[3]

This is about consumer choice about the same way a carny midway gives you the choice of being swindled in a shooting gallery, in a fortune-telling booth, or at a stand where you throw plastic hoops onto plastic ducks — where, of course, the hoops do not fit over the plastic ducks because that’s the whole point, suckers.

Initial press reports indicated that the President’s order would direct the Labor Department to delay implementation of the fiduciary rule. However, someone at the White House apparently realized that the President cannot simply delay the implementation of a finalized rule that has traversed the entire public comment and agency approval process. As a result, the text of the order the President actually signed contained no such provision. Instead, it simply directed the Department to review the rule for adverse effects on investors or retirees.

On February 10, Reuters reported[4] that the Labor Department has submitted two draft rules for review by the Office of Management and Budget. The first would call for a 180-day delay in implementing the fiduciary rule, now due to take effect April 10. This draft calls for a comment period that could be as short as 15 days. The second draft calls for what is essentially a do-over on the public comment period for the fiduciary rule.

We don’t yet know how this latest round of efforts to roll back the fiduciary rule will play out. But for retirees and investors, the most important thing to realize is that the battle lays bare the motivations and priorities of the brokerage industry. Simply put, the brokerage industry opposes any effort to force their representatives to accord investors the standard of care and priority of interests that has made the RIA model of investment advice successful for investors and advisors alike.

[1] Ben Protess and Julie Hirschfeld Davis, “Trump Moves to Roll Back Obama-Era Financial Regulations, The New York Times Dealbook, February 3, 2017. At

[2] Mark Schoeff Jr., “Final Trump memo lacks explicit directive to delay DOL fiduciary rule.” Investment News Daily, February 3, 2017,

[3] Charles P. Pierce, “Say Goodbye to Your Life Savings (Again)” Esquire Politics blog, February 3, 2017, at

[4] “The Trump Administration Reportedly Plans to Delay the ‘Fiduciary’ Rule by 180 Days,” Reuters, February 10, 2017. At, for example,