The “Wind of Change” Is Upon Us

Journal of Financial Planning: September 2021


One of the most famous songs by the Scorpions is “Wind of Change.” Change is a constant, for better or for worse. Regulation of the finance industry is tricky because there needs to be a line somewhere, but where exactly do you draw that line? With constantly evolving technology and global developments, there’s always a race to update the books.

Earlier this year, the U.S. Department of Labor’s so-called Rule 3.0 went into effect. The DOL has further clarified the circumstances in which it considers rollover advice to be fiduciary advice. This means that more simple advice will fall under a fiduciary mandate as it is now considered to be investment advice. This has been a controversial ruling, many years in the making, as opposition to this ruling has stated that this will cause higher compliance costs, especially with fee-only advisers and RIAs. Alas, it has changed, and firms have a new regulation to deal with. Also, as part of a rolling set of partial changes, the DOL’s temporary enforcement policy, enacted in June 2017, is scheduled to end this December.

In other news, while there haven’t been any actual changes yet, the Chair of the Senate Committee on Health, Education, Labor, and Pensions as well as the Chairman of the House Committee on Education and Labor have asked the Government Accountability Office to once again review target-date funds. There is concern that the increased use of equity investments last year, along with other higher-risk options, have opened up the possibility of retirees losing out on retirement savings. The last review of TDFs was in 2009, and it’s safe to say that a lot has happened since then. Keep your ears to the ground for any updates on that, as it could have reaching implications for the industry.

The “Wind of Change” sings about change—the fall of the Berlin Wall and the opening of the world. But there was also fear and uncertainty of how things will change. What does the future hold? West Germany reunited with East Germany and became a major world player and central country in the E.U. Let’s hope recent and potentially upcoming regulatory changes can be absorbed by the industry, making it stronger in the process—just like modern Germany.

General Financial Planning Principles