Don’t take too much comfort in the new U.S. government’s decision to review the forthcoming rule that imposes a fiduciary duty on retirement advice – that move shouldn’t derail the momentum for higher conduct standards in Canada.
On its face, the Trump administration’s recent executive order requiring the U.S. Department of Labor (DOL) to review its new fiduciary rule before it fully takes effect in April, should come as a relief to those who oppose the introduction of a best interest standard in Canada. After all, the tide has been flowing only in one direction over the past few years – toward higher conduct standards in the retail investment business, not just in the U.S., but in the U.K., Australia, and continental Europe.
Yet, at best, Trump’s order should prove to be little more than a bump in the road. The industry is shifting toward higher standards, whether the president likes it or not.
Wall Street’s major firms have already devoted considerable resources to reshaping their businesses to conform to the new rule, and despite the order directing the DOL to reconsider the rule, that’s a long way from scrapping it altogether.
For now, the rule’s future is at best uncertain, which means that firms will likely continue with their efforts to comply with its terms. In the meantime, the rule’s opponents are losing the philosophical war. A U.S. District Court in Texas has struck down a legal challenge to the rule from several industry lobby groups, dismissing their arguments against the rule, which ranged from claiming that the DOL exceeded its authority in drafting the fiduciary rule, to arguments that the rule violates free speech rights, or that the DOL failed to properly consider the costs and benefits of the proposed rule.
In Canada, little that Trump has done so far provides an example that domestic policymakers will wish to follow. If anything, he’s a contra-indicator. Proponents of higher conduct standards in Canada haven’t lost a thing with the U.S. move to reconsider its fiduciary rule – Canadian investors still deserve nothing less than a best interest standard.
Response
Read the response to this editorial from the Investment Industry Association of Canada: IIROC firms already meet the best interests of their clients
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