Not so fast

U.S. asset managers are suddenly scrambling. A Labor Department rule requiring them to put clients’ interests first has unexpectedly survived, although delayed. President Donald Trump ordered a review, but it turns out that hasn’t killed the measure.

The so-called fiduciary rule, intended to reduce conflicts of interest and hidden fees, has faced a winding road since it was first proposed in 2010. The backlash from the industry, which argued it would raise costs for clients with company retirement plans, individual retirement accounts and the like, was intense. The Labor Department gave up in 2011, and the rule wasn’t revived until 2015.

Backed by the powerful AARP, with more than 38 million members aged 50 or older, the Barack Obama administration pushed for the rule, saying individuals lose $17 billion a year because brokers steer them toward products with higher costs than they should be paying.

Trump in February told the Labor Department to re-examine the rule and consider any negative consequences. BlackRock, Vanguard and Allianz were among the asset managers in favor of a delay. Many brokers slowed their compliance efforts anticipating that the rule, originally scheduled to go into effect on Monday, would be indefinitely delayed or revoked.

Last week, however, the Labor Department said key parts of the rule would now go into effect on June 9. That means more investment advisers’ activities will be subject to fiduciary duty, more restrictions will apply to compensation, and more transparency will be required about fees, commissions and conflicts. The department said further delays would hurt investors, though it would continue to study the rule. A White House official said the action was consistent with Trump’s directive.

The investment industry has already lost several legal challenges, while others are pending. It’s possible that Alexander Acosta, Trump’s labor secretary nominee, could work to further delay the changes or scrap them. But the Senate hasn’t yet set a date for a vote to confirm him in the job. That means brokers now have to assume the new requirements will apply, starting in June. That’s good for regular investors – but the fight, at least about the fine print, probably isn’t over.

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