How to best give retirees financial advice took center stage this morning in a crackling debate that kicked off the Department of Labor’s public hearing on its fiduciary rule.
An extended back and forth this morning pitted industry representatives against Barbara Roper of the Consumer Federation of America. DOL officials peppered both sides with questions.
Regular Americans will suffer if the DOL places all advisors dealing with qualified funds under the fiduciary standard, said Nick Lane, chairman of the board of directors at the Insured Retirement Institute.
“The average American is left with a website and the daunting task of facing retirement planning on their own,” he said.
Lane espoused variable annuities as the answer to retirees need for guaranteed income they cannot outlive. Only 3 percent of FINRA arbitration cases involve VAs, he pointed out.
But Roper countered: “It’s not like there’s just one option to get you (guaranteed income). There’s a wide array of products available.”
The DOL will hear from 75 speakers making up 25 panels over four days. Timothy Hauser, a deputy assistant secretary at the DOL, said the record will remain open for about two weeks following the publication of the transcript of the hearings.
He cautioned this morning that observers should not infer anything based on how DOL officials ask questions. While most panels are mixed with rule supporters and opponents, the morning session kicked off with a pro-fiduciary panel.
Raymond Ferrara, chairman and CEO of ProVise Management Group LLC, recalled when the ERISA standard was passed by Congress and took effect in 1975. He welcomed the greater scrutiny.
“One thing I’ve learned after 44 years in the financial services industry is it’s very adaptable and it will make itself work,” he said.
After two calm sessions, panel three featured the debate between Roper, her fellow panelists and DOL officials. At one point, Roper interrupted by asking “one more comment?”
“We wouldn’t stop you,” a DOL official said amid laughter.
Studies show that typical retirement investors lack any sort of sophistication about the process, most not knowing whether they are talking to a broker or an advisor, Roper said.
She disputed the notion that small savers would be left behind.
“There’s absolutely no reason to believe the industry is going to voluntarily walk away from a multi-billion market,” Roper said.
Hauser fed the debate by reading a comment submitted by the National Association of Insurance and Financial Advisors (NAIFA) concerning the lengthy process by which a typical retiree engages with a broker-dealer.
“Is this your understanding of how advice works when it comes to insurance products,” Hauser asked, “with a certain amount of back and forth before you get to specific recommendations?”
Lane responded by saying it depends on the situation. But he joined David Blass, general counsel for the Investment Company Institute, in urging the DOL to remove the “ambiguity” from the final rule.
As the debate moved on to potential expansion of the “seller’s carve-out,” Roper blasted the suggestion. The seller’s carve-out currently applies only to large fiduciaries — fiduciaries with at least $100 million in plan assets under management.
“If you bring the seller’s carve-out into these markets, you’re essentially recreating the problem we’ve spent 15 years trying to solve under the securities law,” Roper said of extending the carve-out to retail advisors.
Once the hearing transcript is published, which takes about a month, a second two-week comment period will commence. The rule could be further revised following the hearing and the comment period.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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