The Department of Labor’s new fiduciary rules could be targeted by Donald Trump’s administration, potentially shaking the ETF industry’s outlook.
The financial industry has already filed several lawsuits against the DOL fiduciary rule as some argued that the new rule would significantly increase liability risk and regulatory costs for advisors and make investment advice more costly to give and receive, reports Mark Schoeff Jr. for InvestmentNews.
SEE MORE: Will DOL Rule Shakeup ETFs? ETF Trends, BNY Mellon Release Report
Before the elections, one of Trump’s advisors, Anthony Scaramucci, managing partner of Skybridge Capital, said that a Trump administration “is going to repeal,” contending that the DOL’s measures is an example of government overreach that could divert too much capital to low-cost passive ETFs and index funds.
“At the end of the day, Wall Street is a circulatory system of capital,” Scaramucci previously stated. “If you’re constraining it through this excess regulation, you’re just going to get less growth.”
[related_stories]The DOL rule, which requires financial advisors to act int eh best interest of clients for 401(k), individual retirement accounts and other qualified accounts, was designed to remove conflicted advice that would diminish retirement savings.
With greater clarity on the high costs of active management in retirement accounts, more investors could turn to low-cost, index-based alternatives, such as ETFs, to gain market exposure. However, the DOL’s support for the ETF industry looks murkier with a Republican administration.
While previous attempts to kill the DOL rule were vetoed by President Barack Obama, a Republican controlled Senate, House of Representatives and White House have a better chance of repealing the law. Moreover, a Republican administration and GOP leadership on Capital Hill could overhaul the Dodd-Frank financial reform law, which also includes provisions to halt the DOL rule.
SEE MORE: How Will Fiduciaries Get Paid? Breaking Down the DOL Fiduciary Regulation
Republicans “have made it clear that rolling back those protections will be on the agenda of a Republican administration,” Barbara Roper, director of investor protection at the Consumer Federation of America, told InvestmentNews. “Congress could and presumably will pass legislation to repeal the rule, and President Trump could sign it.”
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