Industry Representatives: Delay Gives Needed Time to Review DOL Fiduciary Rule
March 21, 2017 by Frank Klimko
WASHINGTON – Trade representatives support a 60-day delay of the U.S. Department of Labor’s fiduciary rule deadline that will give the department more time to remake or nullify the new mandates, which critics say will upend the retirement advice industry.
The rule would postpone the current April 10 deadline until June 9 and is part of the Trump administration’s effort to roll back the fiduciary rule that was initiated by the DOL under President Barack Obama.
Insured Retirement Institute President and Chief Executive Officer Cathy Weatherford said IRI was in favor of the delay. The IRI was among a number of trade groups that filed unsuccessful litigation to block the rule.
“The fiduciary rule will make it harder for retirement savers to plan for retirement by depriving them of access to affordable, holistic financial planning and education and a wide range of investment options,” Weatherford said in a comment filed with the agency.
The fiduciary rule inappropriately expands the definition of fiduciary, Weatherford said.
“An agent who receives a commission on the sale of a product is paid for effecting the sale, not for any investment advice they may have provided,” Weatherford said. “This is clear from the fact that agents are paid only if they make a sale.”
The rule imposes a complex regime that will put a tremendous burden on advisers who serve the middle market, said Paul Dougherty, president of the National Association of Insurance and Financial Advisors.
“The 60-day proposed delay is absolutely necessary, given the fast-approaching April 10 applicability date,” Dougherty said in a comment letter, “and will provide the department a bare minimum of time to consider and implement its next steps without the disputed rule becoming applicable in the meantime.”
The DOL recently said it will not enforce sanctions against companies that don’t comply with the new fiduciary rule if the department is not able to finalize the hiatus before the initial compliance date (Best’s News Service, March 13, 2017).
Richard Foster, senior vice president and senior counsel for regulatory and legal affairs, Financial Services Roundtable, supported the delay. He suggested the DOL adopt an additional six-month delay to give the department more time to review the evidence used to justify the new mandates.
The DOL under Obama used faulty data that suggested consumers were losing $17 billion due to conflicted investment advice given by advisers not acting in their client’s best interest, Foster said. The findings were extrapolated from a study on mutual fund investments that does not apply to retirement advice, Foster said.
“The adverse effects, both near term and long term, of the final rule are apparent,” Foster said in a comment to the DOL. “Published reports indicate that several large providers of financial products and services to retirement investors have determined to cease entirely serving such investors as a result of the final rule.”
Jon Stein, founder and chief executive officer of Betterment LLC, a Securities and Exchange Commission-registered investment adviser, opposed the delay.
“The fiduciary rule is necessary to ensure that Americans receive investment advice that is in their own interests, instead of conflicted sales pitches for high-fee products,” Stein said in a comment letter. “We believe that any delay would needlessly perpetuate conflicted advice at investors’ expense.”
The new fiduciary rules, which change how financial intermediaries conduct business, aim to ensure that any transaction is in the best interest of the client. Except for special circumstances, the requirements generally move such transactions away from commissions to a fee-based compensation system.
The 60-day delay will not be triggered until the rule, which was published in the Federal Register on March 2, becomes final. It can’t become final until after the department has a chance to review the public comments, which were due by March 17.
(By Frank Klimko, Washington correspondent, BestWeek: Frank.Klimko@ambest.com)
