Comments Flood DOL on Fiduciary Rule Delay

Comments are again pouring in to the Department of Labor arguing for and against its controversial fiduciary rule.

As of the close of business Wednesday, the DOL posted 285 comments on a request to delay the rule’s April 10 applicability date by 60 days. President Donald J. Trump ordered the department to seek a delay in a Feb. 3 memorandum.

Republicans control the White House, as well as both chambers of Congress, and are intent on killing the Obama administration regulation. The fiduciary rule requires anyone selling financial products with retirement dollars to adhere to a strict best-interest standard, or face class-action liability.

Comments are split fairly evenly between both sides of the fiduciary fence. Financial services firms, trade organizations and individual letter writers repeat many of the arguments made by both sides. Comments are being accepted here until March 17.

Those opposed to the rule say it will make it nearly impossible to service small savers.

“Advisors cannot justify the risk of a large lawsuit when the account is paying $50/year to the advisor,” wrote Jason Frey of Tri-County Financial in Batesville, Ind. “We want to service these smaller clients as they need help. Please help us by not placing additional burdens in our way.”

Trump’s memo tasked the DOL with studying whether the rule will deprive Americans of retirement advice and/or add undo cost burdens.

Brian McGlynn of Marion, Iowa, suggested placing the onus on clients for knowing what they are buying.

“The largest problem with the rule is it is intended to protect retirement savers from bad advice,” he wrote. “If the government wants to help, they should just mandate every investor sign off that they have completed appropriate basic training on the potential investments that will be made, and sign off on that.”

‘Surely Have to Sell’

Other comments focused on the costs of compliance and heightened threat of litigation.

“If this conflict of interest rule goes through as written we will almost surely have to sell our firm and join a much larger group because we cannot afford all of the compliance costs and don’t have the expertise needed to properly follow the rule as it is written,” wrote Henry D’Alberto of American Financial Associates in Easton, Pa.

Comments in favor of the rule came from investors, as well as some fee-only advisors.

“The fiduciary rule may not be perfect—no regulation ever is. But the fiduciary rule is the only realistic hope for prompt action to improve the quality of retirement advice,” wrote Jon Stein, founder and CEO of Betterment, the nation’s largest independent roboadvisory. “A delay would be bad enough, but it would be even worse if the delay is used as an opportunity to dilute the rule or remove it altogether.”

Given Trump’s stated intention to eliminate as many regulations as possible, many analysts predict the delay is merely a prelude to permanently killing the fiduciary rule.

Many writers wrote in support of the rule from personal experience saving for retirement.

“As a Thrift Savings Plan participant, I am troubled that the people I seek advice from may have a financial incentive to advise me to roll my account into a fund they manage because that's how they would make money, even if it would result in lower returns for me, because there are no legal ramifications for such behavior,” wrote Rodney Adleman.

Others wrote with frustration at the lengthy process, which began with a fiduciary rule introduction in 2010. That rule was later withdrawn in the face of industry opposition, and a new rule issued in April 2015.

“The Fiduciary Rule has been studied to death,” wrote Howard A. Lax.

Two phases

Published April 8, 2016, the rule is slated to take effect in two phases. If the proposed delay is finalized, it will require compliance with all Impartial Conduct Standards on June 9.

The impartial conduct requirements are:

• Acting with care, skill and prudence in assessing your client’s needs, risk tolerance and time horizon
• Putting your client’s interest first - ahead of your own
• Getting paid reasonable compensation
• Disclosing material conflicts of interest
• Making no misleading statements

However, compliance with many of the disclosures, supervision policies and procedures and executing a Best Interest Contract will be applicable on Jan. 1, 2018.

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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