Industry Watchers Point to Fiduciary Rule, ESG, Markets After Trump Win

The U.S. financial services industry, as of Wednesday morning, is preparing for a Donald Trump-led Republican administration in the White House that could have ramifications for a variety of areas related to employer-sponsored retirement plans, ranging from fiduciary standards to Department of Labor priorities.

A Trump administration, combined with a GOP-controlled Senate—and potentially a GOP-controlled House—will lead to two broad outcomes for the retirement industry, says Matthew Eickman, chief legal officer for the Fiduciary Law Center.

The first area, he anticipates, is a broad undoing of much of the DOL’s regulatory agenda from the past four years.

“The new administration will almost certainly repeat the first Trump administration’s abandonment of the most recent fiduciary rule,” Eickman says.

It will also, he believes, pursue a new rule intended to limit, if not eliminate, a fiduciary’s consideration of environmental, social and governance factors when setting a plan’s investment lineup. Currently, the DOL’s final rule on ESG investment in ERISA-governed plans gives permission to take ESG factors into account but does not make it mandatory; the rule during Trump’s first administration only permitted “pecuniary” factors to be considered. Eickman believes that type of guidance may return.

In addition, prior skepticism from the DOL of cryptocurrency in participant-directed defined contribution plans could be eased back.

The second major area he points to is protection of many of the Internal Revenue Code provisions that facilitated higher savings levels in tax-favored in-plan and out-of-plan saving distributions. For example, “it would be a big shock if we were to see any reductions in the amounts participants may save,” he says. “In addition, look for continued support of Roth options, including the mega-backdoor Roth strategy.”

When it comes to broad retirement industry policy, Eickman sees continued possibility to work across party lines.

“Although one might be inclined to anticipate full GOP control would lead to less concern about expanding access to retirement programs, we can look to the passage of SECURE 1.0 during the first Trump administration as a reminder that there will be good public servants thinking of workers at both ends of the compensation spectrum, without regard to which party is in partial or full control,” he says.

Regulatory Environment

Mark Quinn, Cetera’s director of regulatory affairs, noted ahead of the election results that a Republican administration would likely “focus on reducing regulatory burdens and easing restrictions on financial practices.”

Quinn focused in a report on a variety of areas on which advisory firms should remain focused for developments, including the future of the Department of Labor’s Retirement Security Rule—currently stayed by federal courts, but under appeal by the department. The DOL’s focus areas on “worker classification rules” may also get adjustments, along with the Federal Trade Commission’s ongoing push to implement a nationwide noncompete ban that could affect financial services firms—that rule has also been stayed by the courts.

More broadly, a Republican-led administration could alter what has been a relatively rigorous regulatory regime under the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

“Although the regulatory environment continues to heat up, the number of regulatory enforcement actions taken by the SEC and FINRA against financial advisory firms from 2022 to 2024 to date has remained steady based on the number of press releases issued that reference financial advisory firms,” Quinn wrote. “This trend underscores the steady regulatory scrutiny on the financial advisory industry, but certainly the outcome of the elections will have an impact.”

Markets

The short-term effect of a Trump presidency on markets, as of Wednesday, was a jump in equity markets, a decline in bond prices and gains by the U.S. dollar. 

“The dollar has gained ground against a basket of currencies,” wrote Susannah Streeter, head of money and markets at Hargreaves Lansdown. “Investors are bracing for tariffs and a clamp down on immigration, policies considered to be inflationary, which are likely to mean interest rates may be more elevated in the years to come.”

Streeter also pointed to U.S. futures being up, with Tesla Inc. among early gainers against the backdrop of Elon Musk’s support for Trump and potential role in the new administration.

“Although a rally in tech may be on the way, trade tariffs could end up having negative consequences for the sector by potentially exacerbating trade tensions with China and disrupting international supply chains for key components,” Street wrote. “Bitcoin has also rocketed to a record high as crypto fans expect a more supportive regulatory environment.”