The new DOL proposal is not in consumers’ best interests

By Tom Cothron

Welcome to 2024! We rang in a new year, but it almost feels as though we’ve gone back in time.

Late last year, the U.S. Department of Labor rolled out its newest fiduciary proposal, which is eerily like the one they attempted to enact in 2016. Some of the provisions have changed, but the upshot is the same: The rule will threaten a business model used effectively by many financial professionals to serve their clients’ best interests. The rule also will eliminate consumers’ ability to choose how and from whom they wish to receive financial services. Also, like the last time around, the currently proposed rule would result in many lower- and middle-income investors losing access to services and advice altogether.

As it did in 2016, the industry is mounting stiff opposition to the DOL during the rulemaking process and, if need be, will continue to do so after the rule is implemented. Industry leaders, including NAIFA CEO Kevin Mayeux, had discussions with White House officials as the rule was still under consideration.

When the administration published the rule anyway, NAIFA members responded en masse by writing to their members of Congress. They took the message directly to Capitol Hill with in-person meetings during the December National Leadership Conference. They will continue their grassroots campaign in May during NAIFA’s annual Congressional Conference, which will feature an even larger Day on the Hill event.

However, our sense of déjà vu is not absolute. Many things have changed since 2016. Foremost, the Securities and Exchange Commission’s Regulation Best Interest and state laws and regulations based on the National Association of Insurance Commissioners’ model for annuity transactions did not exist eight years ago. Today, they are the law of the land — nationwide in the case of Reg BI and in more than 40 states in the case of the NAIC model.

Both require financial professionals to act in their clients’ best interests. They provide strong consumer protections without disrupting useful business models. They have broad support within the industry. In fact, NAIFA has been the leading proponent of the NAIC model. We have used our advocacy influence to get it implemented in states around the country. Reg BI and the NAIC model make the current DOL proposal completely unnecessary.

We also approach this challenge from a broad base of strength. A coalition of industry partners, including NAIFA, is working to coordinate our message and efforts. NAIFA has merged with the Society of Financial Service Professionals and added Life Happens. FSP bolsters our membership, giving us more financial professionals to deliver our advocacy message, and includes a wider range of financial practice specialties. Life Happens, as the leading consumer-education organization in the industry, amplifies our influence with the American public.

To be clear, serving clients as a financial services fiduciary is not a bad thing. Many consumers are best served by advisors providing advice and services under a fiduciary model. What the DOL fails to recognize, however, is that many other consumers are better served by advisors who work in their best interests without the additional layers of regulation the DOL seeks to impose. We are not opposed to fiduciaries; we are opposed to depriving consumers of choices.

Simply, this comes down to doing what is right. It is in the best interests of American consumers to keep all the options they have now, without the DOL’s unneeded restrictions. Regulations are not inherently bad, but they need to be smart regulations and they need to serve the best interests of consumers.

The DOL’s latest fiduciary proposal falls short on both counts, just like it did in 2016.