President Donald Trump’s request to review the Department of Labor’s “Fiduciary Duty Rule” will most likely not affect ratings of financial institutions and insurance companies, said S&P Global Ratings in a statement issued Feb 9.
One week ago, President Trump issued a memorandum asking that the Department of Labor (DoL) verify if the rule reduces access to retirement products and advice, higher prices for retirement services, or any other negative impacts on consumers. The president asks that the Department revise or repeal the rule if they find any of the adverse outcomes mentioned result from it. The Department is also looking into how it can legally delay applying the rule in the wake of the memorandum.
Created under President Obama
Originally created under President Obama, the rule was meant to protect retail investors by having more products and types of retirement advice covered by fiduciary rule. It also entailed broadening fiduciary standards. It obliged advisors to prioritize the interest of their clients.
S&P Global Ratings thinks that overall, companies will adapt well to the rule and remain in the retirement asset business.
Repealing rule could have mixed effects
If the new administration chooses to repeal the rule, it could take a long time, says S&P Global Ratings. But doing so could improve business challenges, minimize legal risk and make it easier for companies affected by the rule to serve customers.
S&P adds, “A repeal or change conceivably could alleviate pressure on financial advisors to justify any choices that may be more costly (such as actively managed products and commissions-based products) to their clients but can provide a better outcome, perhaps making these companies more willing to serve clients with smaller account balances.” However, the ratings agency warned that abandoning the rule “could reduce investor confidence in advisors and markets.”