a landmark retirement-savings rule is widely expected to be watered down or repealed as republicans look to roll back a series of obama -era regulations. but the principles of the <u+201c>fiduciary rule <u+201d> could survive as the de facto industry standard, given the efforts financial firms have already made to adjust to it. the rule, which holds brokers and others who give retirement advice to a fiduciary standard requiring they act in savers<u+2019> best interests , was approved by the labor department this past spring and is due to take effect april 10. it stands to affect about $3 trillion of retirement assets in the u.s., according to research firm morningstar inc. following donald trump <u+2019>s presidential victory and republicans retaining control over both houses of congress, opponents of the rule have put it in their sights for repeal or replacement. they argue the rule will hurt retirement savers by limiting access to advice, among other things. the obama administration, in pressing for the rule amid the flood of regulations after the financial crisis, has said conflicted advice costs u.s. families $17 billion a year and pushes down annual returns on retirement savings by a percentage point. financial-industry leaders have said those figures are inflated and have fought against the regulation. some brokerages, such as merrill lynch, have defended the rule<u+2019>s intent to hold brokers to a higher standard. some firms and brokers stand to benefit from this shift toward the fiduciary standard, which favors fee-based advice. clients in fee-based accounts are charged a level fee based on a percentage of their assets, minimizing potential conflicts tied to specific investment products that can come with commission-based accounts. brokerages like fee-based revenue because it tends to be more predictable and steady compared with commissions. earlier this month, rep. jeb hensarling, the texas republican who heads the house financial services committee and is being considered to head the treasury department, said talks were being held with the president-elect about the fate of the fiduciary rule and other financial regulations. and trump adviser anthony scaramucci, a hedge-fund investor, has publicly called for the rule to be repealed. <u+201c>we will repeal it as soon as we can,<u+201d> mr. scaramucci tweeted over the weekend, calling the rule <u+201c>an overreach that hurts investors.<u+201d> mr. scaramucci is a member of mr. trump<u+2019>s transition team but hasn<u+2019>t been named to the administration in an official capacity. he didn<u+2019>t immediately respond to a request for comment. in an editorial for the wall street journal earlier this month , mr. scaramucci said the fiduciary rule would punish small savers and small independent registered investment advisers, writing that it <u+201c>may have good intentions but will lead to disastrous outcomes.<u+201d> against a backdrop of republican control in washington and growing calls within those ranks to kill the fiduciary rule, democrats and other proponents have limited options to beat back attempts to repeal or water down the rule. rep. brad sherman (d., calif.), a member of the house financial services committee, said he expects that an attempt by republicans to halt or kill the rule through the legislative process would be met with a senate filibuster, though he isn<u+2019>t confident the legislative-delay tactic would be successful. <u+201c>i<u+2019>m not optimistic, but i<u+2019>m still determined,<u+201d> he said. mr. sherman said proponents<u+2019> best hope for the rule to survive may be in some sort of compromise. <u+201c>i could see a much pared-down rule that at least limits the size of commissions,<u+201d> he said. another possibility is that the rule<u+2019>s implementation date, currently april 10, will be postponed. michael spellacy, head of global wealth management at pricewaterhousecoopers llp, said the trump administration may seek to extend compliance deadlines and give <u+201c>timeline relief<u+201d> to the industry. he expects the rule will remain intact, calling <u+201c>material constructive changes<u+201d> to the rule unlikely. even if the rule is killed, some said compliance efforts that have already been under way and broader industry trends mean financial-advice givers will adhere to its requirements. firms affected by the rule said speculation over the rule<u+2019>s fate hasn<u+2019>t altered changes they have already set in motion. there are the <u+201c>checks and balances of the rule-making process,<u+201d> said rob cirrotti, managing director at pershing llc, part of bank of new york mellon corp. if the president or lawmakers don<u+2019>t abide by that process, a move to kill the rule opens up other challenges, he said, just as the current rule is being challenged in several court cases. <u+201c>the rule is final. so we are moving forward with the understanding that the rule is going into effect on april 10,<u+201d> said a spokesman for lpl financial holdings inc. like lpl, many brokerages have been adapting their business models and updating internal controls to be compliant with the fiduciary rule by april, and some have spent money advertising their commitment to fiduciary responsibility. merrill lynch said last month that it would no longer give retirement savers the option of paying a commission for trades, a wholesale exit from the traditional wall street sales model, and has started an ad campaign highlighting the move. firms <u+201c>have been making calls since september to clients,<u+201d> said denise valentine, senior analyst at consulting firm aite group llc, informing them of changes on account of the rule and explaining that they are going to be adhering to a fiduciary standard if they aren<u+2019>t already. <u+201c>you can<u+2019>t undo that sort of thing,<u+201d> she said. moreover, she said, there is an industry shift toward fee-based advice that predates the rule. the shift has been driven by customers<u+2019> focus on fees<u+2014>an emphasis that has come amid lackluster market returns<u+2014>and it has underpinned a migration of advice-givers from broker-dealers to registered investment advisers, a type of adviser that is required to adhere to fiduciary standards. write to lisa beilfuss at lisa.beilfuss@wsj.com
how the <u+2018>fiduciary<u+2019> rule could live on - wsj
lisa beilfuss