Time For Some Straight Talk On Credit Card Rates

The ANZ move to cut rates on some of its cards will stimulate more discussion on the economics of the credit card business. It may appear a bold move, but we are not so sure.

Actually all the the various bank and ABA initiatives are not necessarily going to help to rebuild trust in the banks. Like a running sore, the ongoing exposure may well reinforce current negative consumer perceptions. A point event like a specific review might actually draw the poison more effectively!  And yes, there are major issues to address.

But, today we look at credit card economics. To do this we use the data provided by the RBA.  They show the number of card accounts (not the same as card numbers because some accounts will have multiple cards on them) has been growing, to approach 16.7 million accounts. The number of transactions on these accounts are also growing, with 241m transactions to December 2016.

The average value of a transaction has remained relatively static, with the average purchase around $120 and the average cash withdrawal around $380. But significantly the proportion of account balances which are accruing interest is reducing, with around 40% of accounts being cleared off each month. Households who can clear their cards should do so to avoid interest costs.

We see the monthly flows of new transactions and repayment match quite closely.

The 60% of balances which are revolving incur interest costs. The data shows despite cuts to the RBA cash rate, rates on both low rate and standard rate cards remain high, and indeed, some low rate cards have moved up recently. As a result the average interest margin between the cash rate and the charged rate is higher than it has ever been, on average close to 20%.  This puts the ANZ 2% cut on some cards into perspective!

So, now we know the proportion of cards which are revolving, and the margin, we can estimate the real net cost to the average revolving card holder. We estimate the typical account will incur a monthly interest charge of $57 each month they revolve, compared with $10 in 2003. In fact we see a stable cost until 2008, since when it has climbed substantially.  This is worth about $80m a month to the banks at the current margins.

To broaden the analysis, banks have also been slugging households with higher credit card fees. Again the RBA says, fees rose 6.6% in 2015 (last year of available data) and they took $1.5 billion in card fees in that year. In the past four years, card fees have risen significantly faster than inflation.

Finally, overall personal credit growth has fallen in recent times, as mortgage borrowing roar ahead. This is consistent with our observation that more households are repaying their cards each month.

Later we will look at the broader economics of cards, taking account of loyalty schemes and merchant fees.  Meantime you can read our earlier analysis of credit card economics by segment. But from a margin view, 2% is hardly a generous concession.

ANZ’s new credit card rate isn’t making the cut, say critics

From The NewDaily.

When you’re doing well, a little generosity is appreciated – except if it is too little, which is what consumer advocates and MPs are saying about ANZ’s surprise announcement that it will be trimming interest rates on its credit cards as of February 28.

And make no mistake, ANZ is doing very well indeed.

Last month it announced that profits for the most recent quarter had hit $2 billion, an increase of 31 per cent on the same period last year. More than that, ANZ Banking Group chief Shayne Elliott is upbeat about the burden of bad debts on his outfit’s books and recently scaled back estimates of that red-ink liability.

So given the ANZ’s strong profit result, they can afford to give users of its credit cards a break, right?

Absolutely, says CHOICE’s Tom Godfrey, who doesn’t see the reductions as anything but a very small bone indeed.

Those reductions should have been much larger, Mr Godfrey said, casting the cuts as a case of too little and too late.

“It’s an attempt by ANZ to try and take the heat off themselves and the other banks to show they’re responding to community concerns,” he said, adding that “the big four banks are just not competitive”.

Mr Godfrey noted that the best interest rates – those offered by the credit unions – are under 10 per cent, and he wondered where ANZ’s rival banks found the gall to charge “toxic interest rates” of “around 18 or 19 per cent or higher”. The best credit card rates available in Australia can be as low as 8.9 per cent.

More than 500,000 existing ANZ Low Rate accounts will benefit from the new rates, with the bank estimating that a typical consumer stands to save about $150 a year.

MPs take the credit

The government has praised the bank for the move, with Liberal MP Scott Buchholz saying ANZ has shown “commercial courage” in lowering its rates.

Malcolm Turnbull also claimed credit. Despite his government’s reluctance to conduct a Royal Commission into the banking sector, he said the newly-formed economics committee, before which the bank CEOs appear, had now provided real results.

“I am bringing the banks regularly before the house economics committee and they are being held to account for their actions and you are seeing real results,” Mr Turnbull said on Sunday.

Neither Mr Godfrey’s criticism nor South Australian Senator Nick Xenophon’s faint praise for the move ruffled the head of ANZ’s retail and commercial unit, Fred Ohlsson, who crowed that the reductions mean customers will have “the best rate available from any of the major banks or any of the regional banks owned by the majors”.

ANZ estimates that a typical consumer stands to save about $150 a year under the new rates.

And that’s the whole point, according to Senator Xenophon, who scoffed that ANZ customers have good reason to be even more miserly with their gratitude than the bank has been with its rate cuts.

“The gap between the official cash rate and credit card rates has never been higher,” he said.

“We really need to look at some form of either greater market competition, or the banks need to really explain themselves in gouging consumers in this way,” said Senator Xenophon, who has been a strong backer of Labor leader Bill Shorten’s call for a royal commission into the banking industry.

Mr Buchholz cited the grilling late last year of bank executives who were dragged before a parliamentary inquiry as a prime factor motivating Sunday’s announcement.

“We will have the banks appearing in the next fortnight in Canberra, along with the Australian Banking Association, where I will continue to take a similar line of questioning with those banks that haven’t taken the commercial choice to shift their interest rates yet.”

Anna Bligh to lead the ABA

The Chairman of the Australian Bankers’ Association, Andrew Thorburn, today announced the appointment of Anna Bligh to lead the ABA as it continues its work to strengthen trust and confidence in banking and deliver better outcomes for customers.

“We are excited to appoint Anna as Chief Executive Officer at such a pivotal time for our industry,” Mr Thorburn said.

“Anna’s focus will firmly be on the culture within banking and lifting respect for our profession; creating a strong vision for customers and on how our industry responds and leads on regulatory reform.

“As I’ve met with Anna I’ve seen the leadership, values and accountability she will bring to the role – and a willingness to confront and challenge the industry to continually improve.

“Anna has a track record of community service and a strong ability to connect with people. She is highly regarded and respected by community, political and business leaders and understands the need for all stakeholders to work together to deliver the best outcome for customers.”

Mr Thorburn added: “Australia has a world-class banking system and there is more we can do to be better for customers and demonstrate the role banks play for them, the broader community and the Australian economy.

“We have also heard the message from customers and from the public, and the industry is serious about change. The appointment of Anna demonstrates our commitment to this.”

Ms Bligh has more than 30 years’ experience in public service, initially with community organisations, before entering the Queensland Parliament in 1995. She held ministerial responsibilities for a number of portfolios including Education and Finance, and served as Treasurer and Deputy Premier before becoming Premier from 2007-2012.

She holds Honorary Doctorates from the University of Queensland and Griffith University and the National Emergency Services Medal for her service during the Queensland floods in 2011. Ms Bligh was awarded a Companion of the Order of Australia (AC) in the Australia Day honours in 2017.

Ms Bligh is currently the Chief Executive Officer at YWCA New South Wales, a role she has held for the past three years. During that time she has worked with vulnerable and financially disadvantaged Australians.

Ms Bligh said: “Our banks are critical to the strength and stability of our national economy and the prosperity and well-being of every Australian. We all rely on our bank for the most important financial decisions of our lives, so we want a system that is open, fair and trustworthy.

“I am excited by this opportunity to lead and shape the reforms needed to strengthen public trust and confidence in our banking system.”

Ms Bligh, who becomes the ABA’s first female CEO, will commence in the role on 3 April. She replaces Steven Münchenberg, who announced in October last year that he was stepping down after almost seven years as CEO.

Mr Münchenberg will finish with the ABA on 14 April, to enable a transition to Ms Bligh.

“On behalf of the membership and Council of the ABA, I want to thank Steven for his commitment and strong leadership as the industry navigated through a rapidly changing political, regulatory and economic environment following the global financial crisis,” Mr Thorburn said.

“Steven is a total professional who has worked tirelessly during what have been challenging times for our industry. We have a stronger foundation to build on thanks to Steven and his team.”

Repealing Dodd-Frank: What’s the Likely Fallout?

From Knoweldeg@Wharton.

In a move that generated widespread concern last week, President Donald Trump signed an executive order that aims to repeal the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Even Dodd-Frank’s strongest supporters acknowledge that parts of the law could be tweaked to remove excessive financial regulation and made simpler. But they worry that in the process of such reforms, much of what is good in Dodd-Frank will be undone.

The Trump administration’s vehicle to repeal Dodd-Frank is the Financial Choice Act, a failed 2016 bill being reintroduced by Republican Congressman Jeb Hensarling, who is chairman of the House Financial Services Committee. The bill gets its new traction from Trump’s presidential order, signed on February 3, which lists seven so-called “Core Principles” to regulate the U.S. financial system. The order directs the treasury secretary to consult with the heads of the member agencies of the Financial Stability Oversight Council and report within 120 days if existing laws and regulations support those principles.

According to Michael Barr, University of Michigan Law School professor and a key architect of the Dodd-Frank Act, the Choice Act would imperil the interests of the middle class, retirees and investors. “It just seems like a recipe for a huge disaster,” he said. “[Dodd-Frank] put in place real guardrails against re-creating the kind of financial crisis we saw in 2008. It is inexcusable that the administration has targeted the most vulnerable people in our society to be the ones that bear the brunt of their ideological push.”

Wharton professor of legal studies and business ethics Peter Conti-Brown does not expect an easy passage for the Choice Act. He said he is intrigued by the game plan of the administration in its pushback against Dodd-Frank. Describing the Republicans in Congress as “a coalition that includes rightwing Rust Belt populism that is hostile to international trade, for example,” he noted that they “should similarly be profoundly skeptical” of most provisions of the Choice Act. “It would be very hard to sell to those who voted for radical change … and call for an end to protections for average workers, consumers and investors.”

Barr and Conti-Brown discussed the likely legislative path and consequences of unwinding Dodd-Frank on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111.

Bank Switching Is A Pain

According to the Customer Owned Banking Association, Australians are willing to switch home loans but believe the process is too painful, there’s too much paperwork and it’s not worth the effort.

These are some of the key findings of a national poll of 1000 Australians by BLACKMARKET Research on what drives competition in the banking market.

“This poll shows Australians want competitive home loans, but they’re being let down by the switching system,” COBA CEO Mark Degotardi said.

“Polls like this tell us there’s a problem – people want to switch but find it too hard to do so, so they simply give up. That’s not genuine banking competition.

“We believe one of the reasons is the amount of time between a consumer asking to switch and their current home loan provider completing the paperwork.

“All stakeholders need to have a closer look at this issue to see if switching can become more efficient.

“If people want to switch from a major bank to a customer owned banking institution, we find it hard to understand in 2017 how it can take up to three months in some cases.”

The BLACKMARKET Research poll of 1000 Australians found:

  • 36% of people say are they are fairly/very likely to change home loans in the next 12 months
  • More than one-third of people say they haven’t switched because the process is painful
  • One in five gave the reason of paperwork or it not being worth the effort for not switching

The poll also found many customers were happy with their current provider, including four out of five customer owned banking customers.

“Customer owned banking is doing well, with market leading customer satisfaction and net promoter score ratings,” Mr Degotardi said.

“Part of the reason is our highly competitive and award winning products, including our home loans that have average standard variable home loan rates 0.64%* lower than the big four banks.

“If consumers shop around they will see there’s real value in switching to a customer owned alternative.”

*14 February, 2017: Comparison calculated using data sourced from the Canstar Online Database for standard variable rate products, which are available to owner occupiers borrowing $400,000 at an 80% LVR. Package, basic, and introductory rates are excluded.

Former Westpac Home Finance Manager sentenced to 3 years imprisonment

ASIC says following an a former Westpac Home Finance Manager, has been sentenced in the Southport District Court to 3 years imprisonment, to be released after 6 months on a recognisance order.

On 2 November 2016, he pleaded guilty to three counts of dishonest use of his position, with the intention of directly or indirectly gaining an advantage for himself or others.

ASIC alleged that between July 2008 and June 2010, he dishonestly used his position and submitted loan applications for approval when he knew they contained false information and false documents.

He obtained over $2.5 million for Westpac customers, that they invested with a now failed Tasmanian property development scheme, operated by Capital Growth International Club Pty Ltd (CGIC) and All About Property Developments Pty Ltd (AAPD) (refer: 15-137MR).

In delivering the sentence, Judge Kent QC remarked that his behaviour was described accurately in his opinion by the Crown as calculated, elaborate, determined and not a fleeting mistake.

ASIC Commissioner Peter Kell said: “his actions betrayed the trust of his clients and caused them significant financial harm. This sentence showed such behaviour will not be tolerated.’

The matter was prosecuted by the Commonwealth Director of Public Prosecutions.

His recognisance is in the sum of $1000, conditioned that he be of good behaviour for a period of 3 years.

Background

ASIC’s investigation found that the customers to whom the loan applications related were elderly and vulnerable and with limited financial means, yet in spite of this, he encouraged them to borrow against their homes, some of which were unencumbered, to invest with CGIC and AAPD, which promised returns of 12–20% per annum.

The customers received monthly interest payments from CGIC and AAPD after they invested, however the interest payments stopped shortly before a liquidator was appointed on 28 February 2011.  This left customers without sufficient income with which to repay their loans to Westpac.

Westpac has compensated customers who obtained loans from Westpac through him in relation to amounts they invested in CGIC.  Westpac has also compensated investors who did not borrow funds from Westpac but claimed to have had some direct contact with him before making their investment in CGIC. ASIC acknowledges Westpac’s commitment to achieving a resolution for the benefit of CGIC investors. (refer: 14-264MR).

In March 2014, ASIC permanently banned him from engaging in credit activities and providing financial services (refer: 14-043MR).

ASIC’S investigations into CGIC, AAPD and its officers are ongoing.

House passes professional standards bill

From The Financial Standard.

Federal laws which will affect the future of the financial planning industry passed the House of Representatives last night.

The Corporations Amendment (Professional Standards of Financial Advisers) Bill, which was first introduced into Parliament in November 2016 by the Coalition, passed the House on the first sitting day of 2017.

Minister for Revenue and Financial Services Kelly O’Dwyer said the Bill comes in response to the actions of a minority of rogue financial advisers.

“Over time, repeated instances of inappropriate advice have led to a reduction in consumers’ trust in the financial advice industry,” O’Dwyer said during a reading of the Bill.

“Reduced trust acts as a barrier to consumers seeking financial advice, which is a poor outcome for both consumers and the industry.”

O’Dwyer recognised the majority of financial advisers have provided high-quality advice to their clients, adding that the measures debated will help to rebuild confidence in the industry.

Under the legislation, financial advisers will be required to hold a degree or a qualification equivalent to a degree, complete a professional year, pass an exam, and undertake continuous professional development.

A single uniform code of ethics will also set the ethical principles that advisers must comply with.

O’Dwyer hopes that the passing of the Bill means that more Australians will have the confidence to seek financial advice, noting that currently only one in five seek advice.

The new professional standards regime will commence on 1 January 2019, following successful passage through the Senate.

Labor’s last minute amendment

Prior to passing the House, Shadow Assistant Treasurer Andrew Leigh called on the government to apologise to victims of bad financial practice following their vote against Labor’s proposed financial advice measures.

“The house calls on current Liberal and National Party parliamentarians to apologise for the disregard their colleagues in the 43rd parliament showed for the many victims of bad practice in the financial advice sector when they voted against Labor’s Future of Financial Advice measures,” Leigh’s proposed amendment stated.

Leigh offered three additional amendments, drawing attention to the lack of trust consumers have in the financial services industry.

Speaking to Financial Standard this morning, head of policy and government relations for the FPA Benjamin Marshan said that while he feels positive about how the Bill passed the house, he is disappointed with Labor’s response, given that the industry is desperately seeking certainty.

“The amendments that the ALP proposed were trying to play games and show up the Government,” Marshan said.

“It’s disappointing that given that financial planners have been looking for certainty. Consumers are looking for increased trust and passing the Bill through unanimously shows that the ALP didn’t have any philosophical issues with the Bill.”

Marshan added that the FPA is looking forward to the Bill passing quickly through the Senate on Thursday.

“We’re encouraged by the commitment that the government is showing to the industry,” he said.

Labor’s amendment was defeated 75-68.

Aggregator slams ABA Review’s “ludicrous” broker findings

From Australian Broker.

There is a “significant risk” that the Australian Bankers’ Association (ABA) Retail Banking Remuneration Review will draw “false conclusions” on broker remuneration, according to the Australian Finance Group (AFG).

Managing director of AFG, Brett McKeon, said the review does not have the information gathering powers or resources required to include broker remuneration within its scope. Instead, it should cede this responsibility to the review currently being conducted by the Australian Securities & Investments Commission (ASIC).

The ABA “should not risk reducing confidence in its findings by referring to, or basing recommendations on, isolated anecdotal statements,” he said in a letter to Stephen Sedgwick AO, who is heading up the review.

An example of how the Sedgwick review misses the point can be found in its recently released Issues Paper which highlighted the banking industry practice of increasing the commission rate of a mortgage product to increase its sales, he said.

McKeon added that this emphasis failed to consider the combination of incentives that a bank may offer brokers, the consumer benefits of brokers fulfilling their responsible lending obligations under the National Consumer Credit Protection Act 2009 (NCCP Act), and negative factors such as increased processing delays caused by these types of promotions.

“The suggestion that a broker will chase higher commission at the risk of recommending something unsuitable or risk clawback and damage their reputation and therefore their business for a few dollars more is ludicrous.”

“In fact, AFG has provided extensive empirical information to ASIC for the purposes of the ASIC Remuneration Review that indicates that there is no real correlation between the commission rate offered and the market share of a lender.”

McKeon also slammed the Sedgwick Issues Paper for alleging that “third-party mortgages are likely to be larger, paid off more slowly, and more likely to be interest only loans than those provided to equivalent customers who dealt directly with bank staff”.

“It is extremely disappointing that the above statement was included in the Issues Paper, albeit with the final acknowledge that the information that was considered is not conclusive,” he said.

Instead, it was important to note that the attributes of loans introduced to the banks through the broker channel directly relate to the attributes of customers who sought out the broker in the first place.

“For example, consumers seeking larger loans may seek the assistance of a broker in order to maximise potential savings.”

Finally, McKeon said there was a danger that the Sedgwick review could treat the roles, responsibilities and risks associated with mortgage brokers as equivalent to financial planners.

“It is important to remember that the government intentionally excluded mortgage brokers from the Future of Financial Advice reforms (FOFA),” he said.

“This approach recognises that the regulatory failures that the government sought to address with FOFA did not include residential mortgages and that mortgage brokers were already subject to an appropriate protective regulatory regime under the NCCP Act, including the responsible lending obligations.”

If scandals don’t make us switch banks, financial technology might

From The Conversation.

An efficient market relies on rational customers being willing to change suppliers when there’s good reason to do so. But what happens when customers stay put regardless? This issue is particularly acute in the banking industry.

Even when bank customers have a very good reason to switch, behavioural economics research shows they’re often reluctant to make the move. For example, big scandals that affect banks have a weak impact on consumer behaviour. However, there is a greater propensity to act among customers who are directly impacted.

Behavioural economics also shows bank customers are often slow to switch to take advantage of better offers from competitors. In 2016, the UK’s Competition and Markets Authority lamented that only “3% of personal and 4% of business customers switch to a different bank in any year” in the country. In 2013, Canstar suggested the figure is slightly higher in Australia at 5%.

Despite the slightly higher propensity to switch banks among Australian consumers, there’s much we can learn from the UK’s use of behavioural economics to nudge customers to act in their own best interests. In particular, financial technology companies can provide information platforms to make it easier for customers to switch.

Why bank customers don’t change

Behavioural economists have shown that consumer decisions are not rational. In particular, there is a “sunk cost bias” that affects consumer decisions. That is, consumers tend to place more value on any previous effort or expenditure they’ve made rather than judging economic value when they make decisions.

If you have left a 20% deposit on an item in a store, you will probably buy it, even if you found the same item for sale at 75% of the price elsewhere. So, customers will tend to stick with the bank they’ve got, despite scandals.

Competition authorities, led by the UK’s Competition and Markets Authority, are increasingly trying the “nudge” options offered by behavioural economics as a way to help persuade an irrational consumer to do what is in their best interests. A nudge is simply a mechanism to encourage people. It might be a reminder as to the consequences of not taking the action or benefits of going ahead.

Regulators have examined ways in which nudges can be given without unintended consequences. For example, should the nudge be a carrot or a stick? And which works best? The UK’s Competition and Markets Authority’s chief economic advisor, Mike Walker, advises regulators to “test, learn and adapt”.

A critical part of any nudge is presenting information in a way that can be used easily by consumers. Intermediaries, comparison tools and other financial technology services can provide this information.

How financial technology businesses could help

One of the barriers at the moment to getting customers to switch in Australia is a lack of information on all bank products and financial technology businesses to manage this information.

Although the UK implemented services that make it easier to switch between retail bank accounts, the UK’s Competition and Markets Authority found that this didn’t improve competition in the sector. To resolve this problem, it has ensured that customers have information on other banks and their account options as part of new account-switching regulation.

The way that this works is that customers can compare their existing offering with alternatives using an app that talks to an open electronic interface to the bank. The UK’s Competition and Markets Authority has mandated that the retail banks provide this interface, known as an applications programming interface, to both consumers and to financial technology businesses.

The effect is a space for new businesses to provide comparison tools. These new financial technology businesses will not impose a significant cost on the banks. Each of the UK banks has spent around £1 million each to create these open electronic interfaces, according to the UK Open Data Institute.

The open electronic interfaces will be associated with the European Union Second Payment Services Directive, which will be implemented before Brexit takes effect. This directive will help automate parts of the switching process.

The Australian banks and the Reserve Bank under the auspices of the Australian Payments Clearing Association are trialling a New Payments Platform to try to make it easier for customers to switch. But it’s not likely to have the same degree of flexibility and consistency as the approaches adopted in the UK, as it focuses on financial institution needs, rather than consumer ones.

Regulators in Australia should use behavioural economic analysis to learn more about how consumers use any new information on bank switching or services on this offered by financial technology businesses.

We’re still waiting on evidence on how these new financial technology companies will change consumer behaviour in the UK. But it is likely that in the very least it will increase the intensity of rivalry between the retail banks, this can only be a good outcome for consumers in the UK.

This could also inform a similar implementation in Australia, particularly after a parliamentary committee’s first report on the four major banks is released.

Author: Rob Nicholls, Lecturer in Business Law, UNSW

Trump to Order Dodd-Frank Review, Halt Obama Fiduciary Rule

From Bloomberg.

President Donald Trump will order a sweeping review of the Dodd-Frank Act rules enacted in response to the 2008 financial crisis, a White House official said, signing an executive action Friday designed to significantly scale back the regulatory system put in place in 2010.

Trump also will halt another of former President Barack Obama’s regulations, hated by the financial industry, that requires advisers on retirement accounts to work in the best interests of their clients. Trump’s order will give the new administration time to review the change, known as the fiduciary rule.

Taken together, the actions are designed to lay down the Trump administration’s approach to financial markets, with an emphasis on removing regulatory burdens and opening up investor options, said the White House official, who briefed reporters on condition of anonymity.

The orders are the most aggressive steps yet by Trump to loosen regulations in the financial services industry and come after he has sought to stock his administration with veterans of the industry in key positions. His plans are sure to face fierce criticism by Democrats who charge that Trump is intent on undoing changes designed to protect everything from average investors to the global banking system.

He also could face a backlash from some of his own supporters, whose distrust of big banks and the financial industry helped fuel the populist anger that propelled Trump to the White House.

Banks ‘Shackled’

Trump is scheduled to issue the directives at a signing ceremony around noon following a meeting of more than a dozen top corporate executives led by Blackstone Group LP Chief Executive Officer Steve Schwarzman. Gary Cohn, director of Trump’s National Economic Council, is meeting with House Financial Services Committee members Friday morning, said two people familiar with his schedule.

Cohn said Friday on Fox Business that the executive orders are intended to relieve restrictions and scrutiny that post-crisis regulations have put on banks, and that firms have been forced to “hoard capital” rather than lend it out to their clients.

“All banks have been shackled,” Cohn said. “We need to get banks back in the lending business.”

On Monday, Trump promised to do “a big number” on the Dodd-Frank Act during a meeting with small business owners. He said the law had damaged the country’s “entrepreneurial spirit” and limited access to needed credit.

“Regulation has actually been horrible for big business, but it’s been worse for small business,” the president said. “Dodd-Frank is a disaster.”

What’s the problem with Dodd-Frank? — a Q&A explains

Trump’s Treasury secretary nominee, Steven Mnuchin, will meet with members of the Financial Stability Oversight Council and report back on what changes the administration should take to alter Dodd-Frank, the official said. Particular attention will be paid to the Volcker Rule limits on banks making speculative bets with their own funds, a restriction promoted by former Federal Reserve Chairman Paul Volcker.

Immediate Impact

The official wouldn’t say how long the Treasury Department would have to complete its review, but did say that the administration would be looking for ways to make an immediate impact, including through administrative changes and personnel decisions.

Trump’s directive also starts the process of stalling the so-called fiduciary rule — set to take effect in April — that the Obama administration said would protect millions of retirees from being steered into inappropriate high-cost or high-risk investments that generate bigger profits for brokers.

The review will include examining making personnel changes at financial regulators as a way of accomplishing the administration’s objectives, the official said. They declined to answer a question on whether Trump would try to fire Richard Cordray, the director of the Consumer Financial Protection Bureau. The official did say the administration believed that some of the rules created under Dodd-Frank may have been unconstitutional, including the creation of new agencies, an apparent

Asked Monday about whether Trump would retain Cordray in his position, White House press secretary Sean Spicer declined to answer. Mnuchin said during his congressional testimony that he believed the CFPB as a whole should be preserved but that Congress should take more direct control of its budget.

The Trump administration doesn’t believe Dodd-Frank measures, including the Volcker Rule, addressed real issues in the financial system, the official said. The president’s team also believes the Labor Department fiduciary rule was unnecessarily restricting investor choice without providing necessary consumer protection, the official said.

Republican lawmakers and some financial firms say the fiduciary rule is deeply flawed, arguing that it will restrict options for consumers and result in some savers being denied advice on their retirements. Trump will call for the Labor Department to stop and review the regulation in its entirety.

While the review will be undertaken independently by the Labor Department, the White House aide signaled that the president was expecting significant change.

Broader Overhaul

Delaying implementation of the Labor Department rule is the first step Republicans and the finance industry are eyeing as part of a broader overhaul of the measure. GOP Lawmakers have argued that the Securities and Exchange Commission, not the Labor Department, should oversee and regulate any changes related to financial firms.

Banks, asset managers and insurers have been fighting the fiduciary rule ever since the Labor Department approved it last year, saying the regulation could raise the costs of providing advice and make it harder to serve lower-income clients. Business groups including the U.S. Chamber of Commerce and American Council of Life Insurers have sued to try to block it.

Still, representatives of some financial services companies said they planned to change practices to meet the regulation’s standard even if it is halted.

“We plan to go forward with the majority of the work we’ve done,” Bill Morrissey, managing director of business development at LPL Financial Holdings Inc., said in an interview before Trump’s order was disclosed. “What investors want is more transparency and lower fees.”

Morgan Stanley, one of the biggest U.S. brokerages, said on Jan. 26 it plans to move ahead with changes designed to comply with the rule, despite uncertainty over whether the regulation will be implemented. Insurers including American International Group Inc. and Principal Financial Group Inc. stressed after Trump’s victory that they would continue to forge ahead as though the rules would be carried out.

“My expectation is that a lot of firms are going to continue installing a best-interest standard, regardless,” said Brian Graff, chief executive officer of the American Retirement Association, a group that represents pension administrators and plan advisers.