Attorney General Doug Chin joined with a group of eight state attorneys general on Monday urging the U.S. Department of Labor to lift its delay in implementing a rule that would require financial advisors to put clients’ best interests ahead of their own.
The investment advice fiduciary rule was set to take effect April 10, but the Department of Labor delayed it by 60 days to June 9. On February 3, President Donald Trump ordered the agency to review the fiduciary rule “to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.”
“To the contrary, postponement of its application is costing investors tens of millions of dollars each day as advisors continue to give conflicted advice and the rule should be implemented without further delay,” the attorneys general wrote in a letter to Acting Secretary of Labor Edward Hugley. “This rule is long overdue and would provide substantial protections to consumers seeking retirement investment advice and create only necessary changes to the retirement investment market.”
The rule would expand the definition of fiduciary and hold all retirement investment advisors to the standard of a fiduciary. In addition to putting client interests before advisors’ profits, the rule also would require advisors to disclose conflicts of interest, and would remove advisors’ limited liability for harms resulting from their advice.
The Labor Department issued the fiduciary rule on April 6 of last year, to protect investors and address problems in the retirement investment advice market. Previously, an agency analysis found that conflicting advice issues were widespread and cause serious harm to investment plan and IRA investors. Additionally, the analysis found that investment agencies often arrange compensation ahead of clients’ interests.
“The rule addresses conflicts that lead to widespread abuse of vulnerable investors and in turn dramatically improves the quality of financial investment advice provided,” the attorneys general wrote. “Rather than self-regulating in anticipation of change, the industry has taken full advantage of their non-fiduciary status to the detriment of consumer investors.”
The letter is signed by attorneys general in the states of Hawaii, Illinois, Iowa, North Carolina, Oregon, Pennsylvania, and Washington, plus the District of Columbia. A copy of the letter is attached.