The Department of Labor (DOL) has finally issued its final fiduciary rule (or what it calls the conflict-of-interest rule), and comments from consumer and financial industry groups have been pouring in.

While most are still digging into the details of the final rule, the initial response has been mostly positive. The final rule includes changes the DOL said were in response to industry concerns.

U.S. Senator Ben Cardin (D-Maryland), a member of the Senate Finance Committee, said he is reviewing the final rule to make sure it is workable. “A best interest standard is key to ensuring Americans receive financial advice they can trust and to combatting truly abusive behaviors in our financial system. As I have said throughout this rulemaking process, it is critical that a final fiduciary rule be workable and useable, and enhance savings opportunities and retirement security for small businesses and moderate income families. I look forward to reviewing the announced changes with these concerns in mind,” he said in a statement.

Consumer groups were especially pleased with the final rule. Nancy Zirkin, executive vice president and director of policy at The Leadership Conference on Civil and Human Rights, said, “This common sense rule will ensure that when working Americans turn to financial professionals for help, they will get honest advice that’s in their best interest—not a self-serving sales pitch. We applaud the Administration and Secretary Perez for taking this much-needed step in improving an outdated system that has cost working and middle-class families billions of dollars in retirement savings due to biased, unethical financial advice. This long overdue rule will protect Americans from the conflicts of interest that allowed advisers to reap excessive profits and kickbacks while costing retirement savers more than $17 billion a year. Today’s announcement will help all Americans—whether they can save a little or a lot—retire with dignity.”

The Consumer Federation of America (CFA) Financial Services Counsel Micah Hauptman, stated, “While we will conduct a more detailed analysis of the rule over the coming days and weeks, our initial review indicates that the rule is a huge win for consumers. It appears that the rule properly closes the loopholes in the current rule so that financial professionals can no longer evade their obligation to serve their customers’ best interest… At the same time, the DOL has offered a balanced approach that reflects considerable input from a variety of stakeholders.”

AARP Executive Vice President Nancy LeaMond, said, “Today marks a tremendous victory for consumers. The new rules ensure that anyone who is saving for their retirement will know that the advice they receive must be in their best interest. This is simply common sense, and it is common practice for many financial professionals already.”

Erin Sweeney, of Counsel at Miller & Chevalier, noted some of the significant changes between the final rule and the proposed rule. “The DOL eliminated some of the most contentious disclosure requirements from the proposal, including eliminating the requirement to develop investment projections and distribute an annual disclosure to investors,” she noted.

Sweeney also notes that the final rule exempts plans covered by the Employee Retirement Income Security Act (ERISA) from the requirement that a fiduciary investment adviser or financial institution enter into a written contract with an investor prior to making a “recommendation.” Although IRAs and non-ERISA plans remain subject to the written contract requirement, the final regulation clarifies that the contract provisions can be incorporated into account opening documents. Moreover, the regulation makes clear that existing clients need not execute a new written contract—instead, advice providers can notify current clients of the amendments and if the client does not object to the modifications, the new provisions will become part of the existing agreement between the advice provider and the investor. Along the same lines, the DOL incorporated a grandfathering rule for existing arrangements. 

“Another notable change is that the DOL eliminated the list of approved investments and indicated that advice providers are permitted to provide investment advice with respect to all asset classes to investors. The DOL also expanded the ability of plans with less than 100 participants to obtain investment advice from an advice provider without that provider becoming subject to the fiduciary rules. Finally, the DOL also clarified what is not covered—the final rule spells out the DOL’s view that health, disability and term life insurance policies are not subject to the fiduciary rule. Similarly, the DOL reserved all appraisal and valuation issues for a later rulemaking,” Sweeney stated.

Rob Foregger, co-founder of NextCapital, said, “The DOL has made very sensible amendments to the proposed rule. The final result strikes the right balance.”

LPL Financial seemed to agree, issuing this statement, “Upon initial review of the Department of Labor fiduciary rule, LPL Financial is pleased by what appears to be positive changes implemented in the rule and appreciates the Department of Labor’s willingness to listen to concerns about protecting choice for investors. In particular, we are encouraged by the increased time frame for implementation, the ability to easily enter into the Best Interest Contract with our existing clients, and the freedom to recommend any assets that are appropriate to help investors save for retirement.”

Despite mostly positive reactions, there were some groups that still expressed concerns with the final rule.

Kenneth E. Bentsen, Jr., SIFMA president and CEO, said, “As with the prior proposal, this final rule is voluminous and every word matters. It will take time to review the rule to determine its impact on investors and their ability to save for retirement. SIFMA has long supported a best interest standard for all advisers, yet we remain concerned that the DOL's rule could force significant changes to current relationships, which may leave clients without the help they need to prepare for retirement, at a time when we all agree that more can and should be done. While we continue to believe the Department's methodology is greatly flawed and lacking sufficient empirical basis, a poorly drafted rule could result in unnecessarily raising costs for investors while limiting their choice, a concern shared by many commentators and other regulators.”

The Financial Services Roundtable (FSR) said it will be analyzing the final rule to determine any appropriate further action. “Policymakers should do everything they can to help Americans be more prepared for retirement and not create red tape that makes saving for retirement more difficult,” said FSR CEO Tim Pawlenty.

FSR also noted that the DoL’s fiduciary proposal has triggered significant public policy and implementation concerns from the financial services industry, academics, policy experts and elected officials from across the political spectrum.

The Insured Retirement Institute (IRI) stated that it made a point to make the Administration and Department of Labor aware of how its fiduciary rule proposal would limit consumers’ choices for retirement products including lifetime income strategies. IRI President and CEO Cathy Weatherford said, “In addition to concerns about limited consumer choice on lifetime income products, IRI and its member companies, along with hundreds of members of Congress on a bipartisan basis and thousands of other commenters, have been concerned that the rule as proposed would restrict access to retirement planning advice for younger savers and those with modest savings.

“We have provided considerable, constructive input to the Department of Labor, the Administration, and policymakers on Capitol Hill to help address these concerns. Through our comment letters, testimony and meetings with regulators, we have provided specific revisions to ensure retirement savers can continue to access retirement planning advice and a full array of lifetime income options. We will carefully examine the rule in its final form to determine if these important changes have been made to avoid any harmful consequences for retirement savers.”