The biggest hallmark for the new Fiduciary Rule is the best interest contract exemption and the need for brokers to get those signed with their retirement plan and IRA clients. Getting legalese written on paper isn’t going to be such a big deal or a getting wet signature for the client. The biggest problem of it all is that the only way to determine what investments are actually going to be in the best interest of clients is that it’s going to take litigation to figure it all out.

I always say that I wanted to be a constitutional lawyer until I took constitutional law and found out it was really only words. There was this whole idea of protected classes and the different levels of scrutiny: strict, intermediate, and rational basis. 20+ years later, I still think it’s only words.

That’s how I feel about the best interest contract. In an environment that will still allow commissions and still allow the sale of proprietary products, what will constitute investments that are in the best interest of the client is up for debate. So the problem is that courts are going to end up being the arbiter of what’s in the client’s best interest because there is no history behind a new regulation. This new Fiduciary Rule is unchartered water for all of us, so it’s going to be trial and error to figure out what’s in the best interest of the client and what’s not. Unfortunately it’s going to take a lot of legal bills for all of us to figure it out.