Pennsylvania Attorney General Josh Shapiro has joined six other state law enforcement chiefs, all Democrats, in asking the Trump administration to stop stalling the Obama-era "fiduciary rule" that "would require financial advisers to put clients’ best interests ahead of their own." They said the rule would curb "widespread abuse" of small investors by fee-hungry salespeople.
The rule would push investment salespeople who aren't already legal fiduciaries to sell only products that are in their clients' financial best interest, force them to disclose sales payments and other potential conflicts of interest, and subject them to lawsuits if they push inappropriate investments at clients' expense.
The rule has the backing of consumer advocates, Vanguard Group founder John C. Bogle, and others who said it would reduce sales of unnecessarily high-fee products.
Bogle's successor, William McNabb, in a statement Monday called on the Trump administration to enact the rule, but with revisions.
The rule has been opposed and criticized by groups representing some investment and insurance salespeople. It was scheduled to take effect April 10, but the Trump administration delayed that to June 9, and has ordered a review of whether the rule could "adversely affect the ability of Americans to gain access to retirement information and financial advice.”
"The rule should be implemented without further delay," the attorneys general wrote in their letter. It "would provide substantial protections to consumers seeking retirement investment advice and create only necessary changes to the retirement investment market.”
Vanguard, the $4 trillion investment company Bogle founded in 1975, on Monday issued a separate statement urging the Trump administration adopt the fiduciary rule — after making certain "revisions."
"Vanguard continues to support the DOL’s efforts to codify best-interest advice with the fiduciary rule," but added, after citing Trump's concerns, that "the rule must be well crafted to ensure that regulations do not curtail access to critical advice services."
The company, based in Malvern, "strongly believes that investors should always receive investment advice that is in their best interest, and those who provide investment advice should be held to a fiduciary standard,” McNabb said in a statement.
"However, Vanguard urges the Department to modify the scope of its definition of investment advice and certain operational aspects of the Rule.” Read Vanguard's 18-page detailed recommendations here.
“Investors — including our retirees — should be able to know their investment adviser is putting their interests first whenever they provide advice on what to invest in,” Shapiro wrote in a statement supporting his fellow Democrats' letter backing the rule.
“The annulment of the government’s fiduciary rule would clearly be a setback for investors trying to prepare for retirement,” Bogle said in a separate statement. “I commend Attorney General Shapiro and other state attorneys general for the action they are taking in defense of the fiduciary duty rule.”
Besides Pennsylvania, the letter is signed by the elected attorneys general in Illinois, Iowa, North Carolina, Oregon, Washington, the appointed attorney general of Hawaii, and the attorney general of the District of Columbia.