Think Twice Before Throwing Out the Fiduciary Rule

Who could be against a rule that requires investment advisers to act in the best interests of their retiree-clients? Donald Trump, the Washington branch of the Goldman Sachs alumni association, the Wall Street Journal, and well-intentioned policy wonks who have never met a regulation they like, that's who.President Trump has set in motion a process that will allow the so-called fiduciary rule to die a quiet death, rather than become effective in April. He has postponed the application of the rule, which would require brokers to act in the best interests of clients, with the expectation that postponement will become permanent. That's what Gary Cohn, a Goldman alumnus who heads the National Economic Council, says he wants to happen. The intention of the rule was to protect investors, especially retirees, from advisers who would assign their clients' interests a lower priority than earning fees from sales of financial instruments. Some who are advising investors are already subject to such a rule but others—insurance and annuity salesmen, for example—are held to a lower suitability standard. Opponents of the rule argue that it will unleash a wave of meritless lawsuits by unhappy investors when the prices of shares and other assets decline, and will deprive small investors of the advice of professionals unwilling to expose themselves to that risk.