The leader of a major financial industry trade association on Friday cast doubt on whether the Labor Department's fiduciary rule would be delayed beyond June.
Industry opponents of the rule have been
urging new Labor Secretary Alexander Acosta to push back implementation of the regulation more than the 60 days it already has been stalled, from April 10 to June 9, while the agency reassesses the measure under a directive from President Donald J. Trump.
"Let's deal with the tough message: Yes, the rule takes effect on June 9, and prospects for further delay, unfortunately, are quite uncertain," Paul Schott Stevens, president and chief executive of the Investment Company Institute,
said at the organization's general membership meeting in Washington. "We are deeply disappointed that the rule's implementation delayed only by 60 days because the rule is already causing great harm."
On June 9, a provision expanding the definition of fiduciary for financial advisers to retirement accounts and another setting impartial conduct standards will become applicable, while the agency spends the rest of the year
conducting Mr. Trump's review, which could lead to modification or repeal of the rule.
The ICI and other rule opponents want the whole rule delayed during the reassessment. Prospects are clouded because the agency would have to conduct a rulemaking for another extension.
"I'm not predicting one way or the other, but June 9 is coming soon," Mr. Stevens said in an interview. "There's a process they've got to go through. The question is whether they can do that by June 9."
A supporter of the rule, which would require advisers to retirement accounts to act in the best interests of their clients, agrees with Mr. Stevens.
"We've been telling our advisers June 9 is pretty likely to stick, so you better be ready for that," said Skip Schweiss, managing director of adviser advocacy and industry affairs at TD Ameritrade Institutional.
In his speech, Mr. Stevens asserted that the DOL rule would force investors to pay more for advice or go without it, disrupt the retirement services industry and increase litigation, the criteria that Mr. Trump set changing or killing the rule.
"Our members report that hundreds of thousands of small retirement accounts have been 'orphaned' just since the Department of Labor announced its 60-day extension," Mr. Stevens said. "Faced with sizable if uncertain legal and regulatory risks of assuming DOL fiduciary status vis-a-vis these fund shareholders, brokers are simply resigning from small accounts en masse."
ICI spokesman Matthew Beck later clarified that Mr. Stevens meant that the accounts had been abandoned since the DOL rule was finalized in April 2016.
But a retirement adviser disputed Mr. Stevens' assessment of the rule's impact.
"That's a very big statement to make without a lot of details," said Aaron Pottichen, president of CLS Partners Retirement Services. "He needs to clarify what he means by 'orphaned.' These are important remarks that aren't fair to the advisory industry."
Mr. Pottichen said that he has met with more than 250 retirement savers over the last six months and none of has been thrown overboard by his or her adviser.
"In not one of those conversations has anyone said, 'My adviser won't work with me because I don't have enough money.'"
Mr. Stevens' statistics are based on a recent poll of more than 30 ICI member firms, according to David Blass, ICI general counsel.
"We predicted this would be an outcome," Mr. Blass said. "It's likely we'll see many more of these orphaned accounts unless the compliance date is further extended or the rule is revised or rescinded."
