Brian P. O'Shea


October 25, 2017


When the Department of Labor (DOL) first proposed the Fiduciary Rule in 2015, it failed to provide compelling and objective evidence of the systemic problem it was looking to solve. Now as the rule has begun to be implemented, it is clear that the rule itself was the problem.

Since the rule’s partial implementation earlier this year, we have already seen millions of retirement investors lose investment options and face increased fees, and this is only the beginning. A study conducted by the U.S. Chamber of Commerce found that more than 13 million more retirement investors will see reduced options over time because of the rule. Other organizations have also conducted research and found that investors will be the ones that suffer from the rule.

While we commend the new administration for proposing an 18-month delay in the implementation of the remaining parts of the rule, the process to fix this broken rule has only just begun. The focus must be to find an alternative solution that preserves investor choice and allows savers to retire with dignity. At its core, the Fiduciary Rule relies on a set of untrue assumptions. First and foremost, it discriminates against the brokerage model of investment, which has served investors well for decades. As the Chamber and others have warned, the rule is likely to force more customers into fee-based accounts which may be more costly and unnecessary for many investors.

Take for example a 50-year old investor that has $50,000 in her IRA and wants a simple investment strategy that involves a diversified basket of exchange-traded funds (ETFs).  Instead of allowing her to purchase the ETFs at a $7 commission or less and rebalancing every couple of years, the Fiduciary Rule could force her into a fee-based account where she is charged an annual fee that is multiples higher than any commission she currently pays. How, exactly, is that in her ”best interest?”

Fortunately, Congress has refused to let this harmful rule go into effect without a fight.  Earlier this year, both the House Financial Services Committee and the House Education and Workforce Committee passed legislation that would repeal the Fiduciary Rule and provide a more appropriate path forward for protecting investors. The DOL developed the Fiduciary Rule absent Congressional authorization, so it is a welcome development whenever Congress seeks to rein in an irresponsible rule.

Another avenue for repeal is by legal means. In June 2016, the Chamber along with several other national, state, and local organizations filed suit in federal court. The groups argue the DOL exceeded their authority, and this overreach will leave retirement investors with fewer choices, higher costs, and reduced access to professional financial advice.

And finally, there is a regulatory fix. Under its proposed 18 month delay of the rule, DOL wants to gather information about the impact it has had and to consider possible changes.

Additionally, the Securities and Exchange Commission (SEC) issued a request for public comments on the Fiduciary Rule. In July at a Chamber event, SEC Chairman Jay Clayton stated, "It would be extremely disappointing to me if whatever direction we go here resulted in a substantial reduction of choice for the individual investor." The Chamber strongly believes that the SEC is the right agency to lead on this issue, and we commend Chairman Clayton for re-asserting the SEC’s jurisdiction on the matter.

When the DOL released the final rule in April of 2016 it created a massive problem for investors that must be addressed. The good news is there are ways to fix this for retirement investors, but if nothing is done the millions who are already finding limited choices and higher fees will only continue to grow. The Chamber will continue to work with our allies in Congress and the administration to roll back the rule and find an alternative solution that protects and serves investors.

About the authors

Brian P. O'Shea