By Cyril Tuohy
Legislative experts said Thursday that details surrounding the Department of Labor’s (DOL) fiduciary standard proposal for advisors handling retirement accounts are expected in the next few weeks. The industry is waiting to see how Congressional Democrats react to the proposal.
Cathy Weatherford, president and CEO of the Insured Retirement Institute (IRI), which this week held its annual marketing summit on the banks of the Potomac River, asked the question on everyone’s mind: “What will it (the fiduciary standard proposal) look like?” she said.
This much the industry knows for sure: the Obama administration - along with an “army” of support from labor, consumer groups, the AARP and Sen. Elizabeth Warren, D-Mass. - support the higher standard of accountability for advisors who work with retirement plans.
On the other side, House and Senate Republicans aren’t fans of fiduciary standards. A fiduciary bar is unnecessary and would raise the costs of doing business for advisors selling insurance and investment products, opponents argue.
The DOL, knowing the Republican majority holds the purse strings, has shrewdly rebranded the fiduciary standards debate as a conflict of interest issue, legal experts said in a regulatory panel discussion held at the Gaylord National Resort & Convention Center in National Harbor, Md.
The Labor Department is well aware that the Republicans in power “can take funding away from it,” in forthcoming budget battles, Sean Cassidy, vice president of federal government affairs with Voya Financial, said during a regulatory panel discussion Thursday.
Separate from the DOL proposal Securities and Exchange Commission (SEC) Chair Mary Jo White earlier this month came out in favor of uniform fiduciary standard of care for retail advisors and broker/dealers.
Her position gives the five-member SEC a 3-2 majority in favor of a fiduciary standard for retail advisors, even if — legal experts and lobbyists noted — the SEC moves slowly and deliberately in all forms of rulemaking.
Fiduciary standards may sound good in principle, but in the end, “you can’t regulate morality,” said financial advisor Carrie Turcotte, president and senior financial consultant with Crest Financial Strategies in Chattanooga, Tenn.
How much can standards add that competent advisors aren’t already doing for their clients, she asked.
She said fiduciary standards are “well intentioned,” but added: “I’m not sure the government is aware of how the industry works.”
The industry lobbyists also said tougher regulatory signals coming from the two federal agencies have emboldened regulators at the state level and with the Financial Industry Regulatory Authority (FINRA). Last year, FINRA levied about $135 million in fines, more than double the $60 million slapped on representatives and advisors in 2013.
“We see states taking much more aggressive action,” said James Shorris, executive vice president and general counsel of LPL financial. Shorris spends a lot of time traveling around the country talking to advisors in LPL’s offices.
Turcotte, however, said that regulators need to get involved in regulation “for the right reasons.”
Regulators who weed out unscrupulous sales tactics serve a valuable purpose, but regulators interested in financial gain at the expense of industry do not.
With the industry gearing up to challenge regulators from everything from fiduciary standards to tax exemptions to disclosures, IRI Board Chairman Bruce Ferris said the organization had beefed up its advocacy efforts in the face of renewed regulatory vigor.
Ferris, president of Prudential Annuities Distributors, said the IRI’s mission will be one of “thoughtful advocacy” and “active engagement” at the federal and state levels.
He said better informed regulators, advisors and customers only serve to improve everyone connected to the industry.
“The objective we seek is to move forward each and every day,” he said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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