Fiduciary standard proponents praised Congress for keeping the lights on for the Department of Labor's fiduciary standard proposal.
The rule, which would require all advisers to act in the best interest of their clients in doling out retirement advice, could have been prevented or delayed by the addition of policy riders to the $1.15-trillion omnibus appropriations bill to be voted on by the House and Senate later this week. The bill dictates spending and keeps the government operating until next fall.
But the policy riders were left out of the bill by congressional negotiators, who concluded their work on the bill Tuesday night, thus almost ensuring that the fiduciary proposal will continue moving forward.
"Those of us who want to see a clarification of the definition of fiduciary are quite pleased with the outcome because it means five long years of waiting will only be one year of waiting," said Mike Webb, vice president of advisory firm Cammack Retirement Group in New York.
He and others expect the rule won't look exactly the same as it does now, especially since the Department of Labor promised to make tweaks based on input during the extended comments period.
"With all the comments, I think the DOL can arrive at a rule that won't make everyone 100% happy, but is going to make all constituent parties sufficiently OK with the rule that they can move forward," Mr. Webb said.
One consideration that Jason Smith, chief executive and founder of advisory firm Prosperity Capital Advisers in Westlake, Ohio, would like to see incorporated is the allowing of advisers to earn commissions. He said he has junior advisers, who are working with clients who have smaller assets, and they are compensated by fees and commissions.
"If they do not have an opportunity to earn commissions, then they are just working on fees," Mr. Smith said
The proposal as it stands now would make it difficult for some advisers to work with middle-income clients, according to some opponents of the rule.
"We won't be able to afford it as a business," Mr. Smith said. "I am in favor of the fiduciary rule, but I think they need to make changes so it is more reasonable to operate and serve those people."
Anthony Domino, an adviser with Associated Benefit Consultants in Rye Brook, N.Y., said there is still a ways to go before the rule comes to fruition.
"The potential for a legislative fix is not over," Mr. Domino said. "I suspect we are not at the end of this conversation."
Mr. Domino, who likened the recent DOL fiduciary proposal win to a cliffhanger, said more needs to be done.
"Practically speaking, all it will do is make it hard for the mid-level employee to receive quality advice on a retirement plan and more expensive for that person to get it," he said. "It will have the opposite effect than it is intended to have, and make it easier for the affluent to get coverage and advice and more difficult and expensive for the less affluent to get the advice."
Knut Rostad, of the Institute for the Fiduciary Standard, said opponents will continue to put up a battle for the bill. Though he expects to see adjustments made to the proposal, he said Congress made the right decision not to include the fiduciary standard in the omnibus bill.
"I think the larger point to remember is how focused and determined certain members of Congress are at defeating fiduciary duties and that hopefully is something that investors can remember come election time," Mr. Rostad said.
Other advisers were happy to hear the news this morning.
Great news for RIA's The fiduciary rule is on its way in 2016— Tunc Tanin (@TuncTanin) December 16, 2015
Happy holidays to investors - no rider on the spending bill to delay the DOL's efforts to protect the public with a fiduciary duty rule.— Marnie C. Lambert (@MarnieLambert) December 16, 2015
Industry professionals will need to act in their clients best interests. This change is long overdue.
The next step for advisers, if this rule is to pass, is to educate their clients on the fiduciary standard, some advisers said.
"There needs to be an educational effort so the participant feels confident," Mr. Webb said. "Without communication, as we have seen with fee disclosures, all it will create is more confusion."