DOL Fiduciary Debate Day II: Clash of the Studies

A pair of academic researchers squared off against financial execs this morning on day two of the Department of Labor’s fiduciary rule public hearing.

The dialogue focused on advice, with Jonathan Reuter, associate professor of finance at Boston College and Antoinette Schoar, professor of finance at MIT, each presenting their own research and claiming broker-dealers often steer clients to higher-fee products.

“It pits the broker against the consumer rather than with them,” Schoar said. “My research has also shown that disclosure alone will not fix these problems.”

Sean Collins, senior director of industry and financial analysts for the Investment Company Institute, took issue with how the professors’ characterized “advice.”

Receiving advice within a fund structure is different from receiving general investment advice, he noted.

“I would caution against comparing those two because they are not the same,” he said.

Collins added that he isn’t aware of any studies “showing that brokers are putting clients into worse outcomes.”

The DOL hearing will continue through Thursday, with 75 speakers representing both sides set to give remarks. Monday featured testimony from various industry groups and trade associations.

Carl Wilkerson, vice president and chief counsel of securities and litigation for the American Council of Life Insurers, mentioned the ongoing problems the United Kingdom is experiencing after abolishing commissions in 2012.

Studies show 11 million small savers have fallen through the cracks since the UK adopted a similar fee-based system, he said.

“Those in the weakest position stand to lose the most from a lack of advice,” Wilkerson said.

Asset management and wrap fees could make it more costly for retirement savers in the long run, Wilkerson added. He downplayed the impact robo-advisors could have in filling the void.

“There are no rigorous studies that have examines whether a robo-advisor is a good substitute,” he said.

The hearing continues until 5:15 today. Check back for further updates.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.