By Peter Hong

Just a few weeks ago, April 2017 was ready to deliver a crushing blow to the economic health of Main Street America. The fiduciary rule was to take effect, thereby threatening for extinction hundreds of thousands of small-brokerages and independent insurance agents. Millions of Americans who rely on commission-based brokers to manage their smaller portfolios were in danger of losing access to affordable investment advice.

Thankfully, on Feb. 3, President Donald Trump gave Middle America a reprieve by delaying for six months this relic of bureaucratic overreach by the Obama-Perez Labor Department to review the regulation. Once that review is complete, he could save the day by throwing the fiduciary rule on the ash heap of the Obama administration where it belongs.

The fiduciary rule is based on the notion that brokers and agents who work on commission do not have their customers’ interests at heart. This should come as no surprise after eight years of an administration that thrust government in the middle of every business relationship in America. The rule was designed to drive investors away from commission-based products and services, such as investment advice, and toward those who charge an upfront fee. For investors and savers with smaller portfolios, that option is simply unaffordable.

As Manhattan Institute economist Diane Furchtgott-Roth notes, the rule is not even based on actual complaints from investors about the current system. Instead, it resulted from a faulty study by then-President Obama’s Council of Economic Advisers (CEA).

Among the claims asserted by the CEA study is that assets subject to broker commissions underperform products sold directly to investors without a broker by approximately 1 percent. Relying on academic studies and without a rigorous analysis by CEA staff, the report claimed a $17 billion loss for investors using a commission-based broker. That’s pretty sketchy evidence on which to throw out an entire industry on its collective rump.

The fiduciary rule bans the practice of commission-based investment advice, unless the broker and customer reach a “best interests contract.” This new contract requirement would subject investment advisors and insurance agents to bureaucratic disclosures about commissions, speculative projections about future fees and costs, and the potential of future lawsuits from customers disappointed by returns.

Let us remember who is being targeted by this this new rule. The victims are not the big banks, Wall Street brokerages, or mega-insurance companies, but the brokers and agents who build their small businesses on Main Street and who live in the same communities as their customers. They have a personal and professional investment in seeing their clients make sound decisions. Fiduciary responsibility is properly steeped in community, not by government coercion.

Similarly, their customers are not institutional investors with their lawyers, but rather smaller-portfolio investors and savers, many of whom choose to pay commissions because they cannot afford an upfront fee. They choose to use a local broker or agent, because they want the personal attention you cannot receive online or by phone. And if their local advisor is driven out of business, they will be left without the ability to choose affordable investment and insurance products and services.

The Obama regulatory state spent eight years laying waste to the economic health of Main Street America; in November, Main Street America punched back. Like the cavalry in an old war movie, President Trump rode in to save small businesses in Middle America from economic extinction. He can kick off the recovery by rescinding the fiduciary rule.

Peter Hong is a contributing reporter at Americans for Limited Government.