In the face of a fierce lobbying campaign, the U.S. Labor Department backed down in 2010 from a sweeping proposal to change how broker-dealers and investment advisers render advice on retirement accounts. Six years later, with that rule set to take effect next April, the fight over the so-called “fiduciary rule” is heading to court.
On Thursday, a federal judge in Washington is set to hear the first major challenge to the fiduciary rule, which calls for brokers handling retirement accounts to work in their clients’ “best interests”—a heightened standard designed to curb billions of dollars in fees paid to financial industry.
Investment advisory groups and business advocates have lined up to challenge the rule, which was finalized earlier this year. The court fight has three fronts, with lawsuits pending in Washington, Texas and Kansas federal district courts.
Dennis Kelleher, president and chief executive of Better Markets said NAFA is “just an industry group trying to kill a rule requiring them to put their clients’ best interest first.”
Fixed indexed annuity products identified in the Labor Department rule, Kelleher said, “are treated differently because they are loaded with conflicts of interest [and charge] huge commissions of 6% to 8%.”
To read the full National Law Journal article by Ryan Barber and Melanie Waddell click here.