IRI: 155,000 Clients Dumped by Advisors Due to DOL Rule

By Cyril Tuohy

More than 155,000 clients have been dumped due to the Department of Labor’s fiduciary rule, an industry group said Monday.

The claim by the Insured Retirement Institute is based on a survey of customers last month as part of “new evidence” that the fiduciary rule has harmed investors since the first implementation phase went into effect June 9.

The survey of IRI distributor members found that “approximately 155,000 of their clients have already been orphaned, with far more accounts expected to be impacted as implementation of the rule proceeds,” the IRI said.

Findings were included in the IRI’s comment letter to the DOL, which has asked for more information on the fiduciary rule in accordance with a February directive issued by President Donald J. Trump.

A public comment period on the rule ended at 11:59 p.m. Monday with 133 comments filed with regulators.

The comment period ending yesterday brought to a close a month-long information collection process that began after the DOL indicated an interest in exploring new exemptions. Likewise, amending existing exemptions is an option to make it easier for financial companies and distributors to sell advice and financial products into retirement accounts.

Divided Over Disruption

Industry groups opposed to the rule have warned for more than a year that the rule would curtail access to investment help as advisors drop smaller, less profitable accounts.

“This new information shows the rule is already negatively impacting the ability of many American savers to maintain access to a wide range of financial products and services,” said IRI President and CEO Cathy Weatherford, in a news release on Monday.

The regulation is causing “significant market changes that now deny consumers access to advice,” and “constrains education and information about retirement planning options,” the American Council of Life Insurers said in a news release.

ACLI also strongly advised the department to coordinate with the Securities and Exchange Commission and state insurance regulators.

“A coordinated and harmonized regulatory approach is necessary and in the best interest of retirement savers,” ACLI said.

But supporters say the rule will help reduce conflicts of interest among financial advisors. In any case, less profitable accounts with lower asset balances and simpler needs are better served by cheaper, more efficient advisory alternatives, rule proponents say.

Internet-based algorithms, or roboadvisors, are one such example.

Several insurance company executives as well as surveys by independent consultants also report minor disruptions to agents, distributors and clients in the wake of initial requirements implemented on June 9.

In a separate two-week comment period that ended last month, regulators collected information about delaying full implementation of the rule beyond Jan. 1, 2018.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].