The Labor Department finalized an amended version of its fiduciary rule, providing wealth management firms a lengthier timeline for implementation as well as more relaxed requirements for the best interest contract exemption.

The changes suggest that Obama administration officials want to assuage industry concerns about the workability of the rule and potentially avert court fights, while still enacting a higher standard of duty to clients.

"With the finalization of this rule, we are putting in place a fundamental principle of consumer protection, that a consumer's best interest must come before a financial advisors' best interest," Secretary of Labor Thomas Perez said.

The timeline to implement the rule was extended to one year from eight months in the amended version.

Firms will need to be in full compliance by Jan. 1, 2018. Industry trade groups such as SIFMA had been arguing that the original eight month timeline for implementation was unreasonable because complying with the rule would be a "massive undertaking."

The best interest contract exemption has been changed significantly. The Labor Department now says clients will have to sign such a contract when they open accounts, not when they first meet a broker or advisor. The exemption was the subject of intense industry scrutiny, with CEOs and industry trade groups sharply criticizing it, saying it would be unworkable in practice.

Perez said the department made these and other changes after receiving feedback from industry groups and consumer groups. "We listened, we learned and we adjusted," he said.

The final version of the rule also does not penalize proprietary products, such as complex annuities.

"Proprietary products are certainly permissible products that have an important place in the market. The key is … you have an obligation to put your clients' best interests first," Perez said.

Also of core importance to wealth management firms: They'll be able to notify existing clients of the changes in the firm's obligations via email, Perez says.

'It's Now the Law'
The amended version is scheduled to be published today, ending several years of contentious debate that included intense industry lobbying and several failed attempts by Republicans in Congress to derail the effort to craft a new standard governing retirement advice.

The fierce back-and-forth between opponents and advocates was due in no small part to the dramatic effects the rule could have on those whose income depends on advising Americans on their retirement assets – more than $22 trillion, according to Cerulli Associates.

Privately, executives have said the complexity of the rule will make it difficult to develop new compliance policies and procedures, particularly for larger firms that have more than 10,000 advisors.

And while changes made by the Labor Department may go a long way to easing the industry's acceptance of the rule, all wealth managers, financial advisors and financial planners will now be held to a new, higher standard when providing retirement advice.

This article originally appeared on Financial Planning.

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