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Survey: DOL’s fiduciary rule already hurting savers, financial professionals

By Jessica Karmasek | Aug 18, 2017


WASHINGTON (Legal Newsline) - While full implementation of the U.S. Department of Labor’s fiduciary rule may be delayed, some argue the rule already is harming retirement savers and financial professionals.

The Financial Services Roundtable, an advocacy organization for the nation’s financial services industry, polled 600 financial advisers from July 7-12.

The survey, conducted by Harper Polling one month after the rule’s June 9 initial compliance deadline, shows “significant disruption” to the marketplace, according to FSR.

The rule, released in April 2016, mandates financial professionals who service individual retirement accounts, including IRAs and 401(k) plans, to serve the “best interest” of the savers and disclose conflicts of interest.

According to FSR’s survey, only 12 percent of financial professionals report the rule is helping them to serve their clients’ best interest. Thirty-three percent report there has been no impact. However, those respondents report more complicated paperwork for clients and servicing fewer small accounts.

A majority of the poll’s respondents, or 50 percent, report the rule is restricting them from serving their clients’ best interests.

In addition, 75 percent of those surveyed who report their typical clients have starting assets under $25,000 indicate they will take on fewer small accounts due to increased compliance costs and legal risks.

“Properly taking into account the market reaction that followed the adoption of the Rule, FSR believes that the Department will necessarily conclude that appropriate revisions to the Rule and the Accompanying Exemptions would create a more efficient, effective, and appropriately tailored regulation that will preserve access to advice and choice of products and services that meet the particular needs of each Retirement Investor, especially investors with modest account balances,” FSR wrote in a letter submitted to the DOL last week following a Request For Information, or RFI, on the rule.

In June, the DOL published a RFI related to the rule and whether to delay its full implementation.

“The RFI is an opportunity for the public to provide data and information that may be used to revise the rule and associated exemptions,” the department said in June 29 news release.

The DOL said public input would assist in “determining future actions on the rule and related exemptions.”

FSR included the survey data in its letter to the DOL.

In April, the department released a measure officially delaying the implementation of the rule and its related exemptions by 60 days, until June 9.

But written disclosure requirements and the full best-interest contract, or BIC, exemption are scheduled for Jan. 1, 2018 implementation.

The DOL and its new secretary, R. Alexander Acosta, last week notified a Minnesota federal court that it submitted to the Office of Management and Budget, or OMB, proposed amendments to three exemptions.

The proposed amendments include an “extension of transition period and delay of applicability dates” from Jan. 1, 2018 to July 1, 2019, according to the Aug. 9 filing in the U.S. District Court for the District of Minnesota.

The brief, two-page filing -- a notice of administration action -- did not include any further explanation.

According to the filing, the proposal was to be published in the Federal Register Aug. 10.

FSR argues a two-year delay is more appropriate to “avoid further confusion and disruption to America’s retirement savers.”

The organization believes 24 months, instead of the DOL’s proposed 18 months, will allow for regulatory coordination between the DOL and the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority Inc., and insurance authorities.

“FSR strongly supports a ‘best interest standard,’ but the Rule’s overly-complicated red tape is already harming the ability of Americans to save for retirement,” FSR Executive Director Eric Hoplin said in a statement. “Without needed improvements, this could go from bad to worse.”

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Organizations in this Story

U.S. Department of LaborFinancial Services Roundtable PAC