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When the Department of Labor (DoL) rolled out its fiduciary duty rule last year, I (and others) noted that its likely effect would be to harm the very people it purports to protect. Unfortunately, it seems I was right.
Specifically, the poll found that 68 percent of respondents would be taking on fewer small accounts due to increased compliance costs and legal risks.
The rule is intended to help individuals make good choices when saving for retirement. Under the rule, brokers who sell retirement investments are to be held to a “fiduciary duty” standard. This is often expressed in the legal world as the care a prudent person would take in managing his or her own affairs. Those who hold positions of great trust, such as those who are given authority to act for another, are often designated fiduciaries under the law. For example, corporate board members are fiduciaries of the company they serve, and lawyers owe a fiduciary duty to their clients.
Thaya Brook Knight is associate director of financial regulation studies at the Cato Institute.