Ethics Center: Business Ethics

Advisor Alert: Fiduciary Rule is Dead . . . Long Live the Fiduciary?

With the election of Donald J. Trump as president, most financial-services experts have predicted the demise of the Department of Labor’s Fiduciary Rule. Although the measure partially took effect on June 9, 2017, full implementation was delayed until January 1, 2018 essentially postponing enforcement until then. The jury is still out on what will happen next year, but most predict further delays, a watering down, or the beginning of a full-blown repeal effort.

Although fiduciary opponents are celebrating these developments, we’d like to point out that the best-interest standard is far from dead. Here’s why:

  • First, the state of Nevada passed a new law (Senate Bill 383) requiring all broker-dealers, sales representatives, investment advisors or investment investor representatives to uphold a fiduciary duty toward their clients. A prior law had imposed that standard upon so-called “financial planners,” which gave insurance and securities professionals the ability to slip through a nomenclature loophole. Other states, including New York and California are reportedly considering fiduciary measures of their own.
  • Second, the Certified Financial Planner Board of Standards, Inc., released a new ethics code and standards of conduct that broadened how it defines fiduciary. Under its prior code, the CFP board mandated fiduciary conduct on its mark holders only during the financial-planning process. This allowed insurance agents and securities brokers to serve as fiduciaries only during planning and then to switch to a suitability standard when they sold products during plan implementation.
  • Third, the Securities and Exchange Commission recently sought industry input on if and how the SEC should create a fiduciary rule of its own. SEC Chairman Jay Clayton said he welcomed collaboration with the DOL in order to produce what may become a single, harmonized best-interests standard, not one focused solely on retirement advisors.
  • Fourth, a bipartisan group of 12 state treasurers signed a joint letter to U.S. Department of Labor Secretary Alexander Acosta urging him not to revise the current DOL Fiduciary Rule, suggesting more states might be willing to enact fiduciary protections if the federal governments steps back from the DOL rule.

What does it all mean? That the fiduciary movement is still alive, at least at the state and industry levels. Which also means it may be premature for financial advisors to assume they will never be held to a fiduciary standard, at least for those advisors operating in a blue or blue-leaning state or as CFP planners. And the fact that many insurance and financial-services companies are prohibiting or scaling back variable compensation means insurance and securities professionals may become de facto, if not de jure, fiduciary advisors before too long.

Bottom line from the National Ethics Association. Whether your license imposes fiduciary conduct upon you or not, do your best to serve your clients’ best interests. A good starting point: the Institute for the Fiduciary Standard’s Professional Conduct Standards, dated March, 15, 2017. If you operate under these guidelines, you will be on solid ground regardless of what happens on the state or federal regulatory front next year and beyond.

For information on affordable E&O insurance for low-risk insurance agents, investment advisors, and real estate broker/owners, please visit For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.