By Kenneth Corbin

A federal judge has struck down the Department of Labor's rule on retirement advice that classified more financial professionals as fiduciaries. The rule met with fierce opposition from the financial services industry. The Texas court's ruling on Tuesday ends the latest chapter in a long-running, politicized fight over the standard of conduct for advisors working with clients saving for retirement.

Under the Labor Department's retirement security regulation, also known as its fiduciary rule, many financial professionals offering one-time recommendations on issues such as rolling over a 401(k) plan or purchasing annuities would have been subjected to the compliance obligations and standards of conduct of a fiduciary advisor under the Employee Income Retirement Security Act, or Erisa. That rule was adopted in April 2024 and portions of it were slated to go into effect in September of that year before it was temporarily blocked by a federal court.

The debate over the issue was always highly partisan, and when President Donald Trump returned to the White House last January there was little hope that his administration would mount a vigorous defense of the fiduciary rule amid legal challenges brought by industry groups. An Obama-era effort to improve retirement advice through Labor Department regulation met with a similar outcome during the first Trump administration, which allowed the rule to die in court.

This week, Judge Reed O'Connor of Texas issued an order vacating the fiduciary rule after the Labor Department signaled it wouldn't fight to defend the regulation and essentially aligned itself with the industry groups behind the legal challenge. That followed a similar move by another Texas judge, Jeremy Kernodle, who last week ruled against the Labor Department's rule in a different case.

The rule itself had been stayed in July 2024 due to the legal challenges before it took effect, and early on in the second Trump administration the Justice Department indicated that it didn't intend to mount a vigorous defense of the regulation.

Business as usual. While the Labor Department has said that it is examining an alternative standard for retirement advice, the demise of the fiduciary rule essentially means business as usual for the financial advisors who might have been worried about having to adhere to a stricter code of conduct, regardless of whether they were working in a banking, brokerage, or insurance channel.

Industry opponents of the fiduciary rule argued that two major consumer-protection regulations obviated the need for any additional compliance requirements. The first, covering brokers, is the Securities and Exchange Commission's Regulation Best Interest, which requires covered advisors to make recommendations that are appropriate for their clients, including a consideration of commissions and fees and an evaluation of suitable alternatives.

Opponents of the Labor Department's fiduciary regulation also said retirees would be sufficiently protected by a model rule promoted by the National Association of Insurance Commissioners that would set a "best interest" standard on insurance producers designed to ensure that advisors promoting annuities are pitching products that are suitable for their consumers. The NAIC has reported that 49 states have adopted that model rule, while the 50th, New York, has its own regulation that is seen as more stringent.

Legal experts say that without the fiduciary rule, the framework for determining if an advisor is acting as a fiduciary reverts to a historic multipart test that includes the question of whether the financial professional offers retirement advice to plans or individuals on a regular basis. If not, as in the case of making many one-time recommendations, such as for a retirement-plan rollover, the advisor likely wouldn't be deemed a fiduciary.

The Labor Department has indicated that it is working on a replacement retirement-security rule that would almost certainly be friendlier to the industry. The department has penciled in May 2026 as a target for issuing an updated rule, though the regulatory calendars that federal agencies provide are nonbinding and often little more than ballpark estimates of when a rule-making might advance.

In the meantime, advocates of stronger fiduciary requirements who had cheered on the Labor Department's attempts to tighten the rules for retirement advice say the fight isn't over. Knut Rostad, president of the Institute for the Fiduciary Standard, says he is confident that the "fiduciary culture" within the Labor Department "will find a way to get through the powerful interests."

Does that mean that he is expecting the next Democratic administration to try once again to enact a fiduciary rule -- one that survives the inevitable legal challenges that have undone the Obama and Biden administrations' attempts to regulate retirement advice?

"No question," Rostad says. "And sooner than many believe."

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 18, 2026 16:20 ET (20:20 GMT)

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