In Response To President Trump’s Latest Executive Orders:
Today, President Trump signed two executive orders that will significantly impact the current state of financial regulation in our country. Due to the financial crisis that took place between 2008 and 2010, massive regulations contained within the Dodd-Frank Act were imposed on the financial system. These regulations were designed to help protect the public from potential abuse by financial institutions. While we believe some measures of the regulations were well intended, we believe there have been some unintended negative consequences. The financial industry was already a heavily regulated industry prior to Dodd-Frank.
The second executive order President Trump signed is in response to the Department of Labor’s Fiduciary rule, that was scheduled to be effective in April of 2017. The rule states that retirement advisors must act in the best interest of their clients. This is an enhancement to the suitability rule currently in place. Under suitability, advisors are obligated to recommend investments that are suitable, or appropriate for clients, based on the client’s income, investment knowledge and risk tolerance. Under the Fiduciary rules, financial professionals are legally obligated to put their client’s best interest’s first rather than simply finding “suitable” investments. The Fiduciary rule would have resulted in many advisors no longer being able to receive commissions on the sale of retirement products as such commissions would have been deemed to be a conflict of interest.
At Wisdom Investments, we believe in fiduciary responsibilities and many of you already know we act in a Fiduciary capacity for our clients. This executive order will delay the fiduciary rule until the current administration has the opportunity to review and amend the rule. Clearly these two executive orders send the signal that the Trump administration feels the current regulatory state is unnecessarily burdensome. These moves by President Trump are another indication that he intends to follow through on his campaign promises. While loosening regulations will ultimately help benefit business, the executive orders will face backlash from the Democrats arguing the decrease in regulation will negatively affect middle class investors.
In summary, the status quo for investors remains the same. At Wisdom, we believe the Fiduciary standard will eventually be passed and we are supporters of the standard. We currently do business under that standard because we believe the fiduciary standard is beneficial for clients. The fiduciary proposal did have many ambiguous provisions and we are hopeful the postponement and review will provide clarity.
In the meantime, if you know someone who is upset about the postponement or just know someone who is interested in working with a firm that always puts their clients’ interests first, in a fiduciary manner, have them call us or send us their name and we will contact them. We place great value in the confidence you show in us and will do our very best to earn that continued confidence.
Bill Kmiecik & Jose Cuevas