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Aug 09 2017

Study: Advisors Drop 150,000 Clients Due to DOL Fiduciary Rule

The Insured Retirement Institute, an industry trade group, responded to the Department of Labor’s request for information claiming that the partial implementation of the fiduciary rule is having a detrimental effect on both the insured retirement industry and retirement savers.

The fiduciary rule, which currently under review as directed by President Trump, seeks to eliminate conflicts of interest in the marketplace for retirement investment advice. Portions of the rule went into effect on June 9th while full implementation is slated for January 1, 2018.

The DOL recently issued a request for information seeking additional comment on whether to further extend the transitional period beyond January 1, 2018, and whether the fiduciary rule’s revised exemption structure should be modified.



“IRI continues to urge the [DOL] to delay the applicability date for all remaining aspects of the fiduciary rule,” said IRI president and CEO Cathy Weatherford. “Furthermore, we urge the [DOL] to collaborate with the appropriate federal and state regulators – including the Securities and Exchange Commission and the National Association of Insurance Commissioners—to develop a consistent and workable best interest standard that will allow consumers to access the advice they need to achieve a financially secure retirement.”

The trade group urged the DOL to delay the applicability date until January 1, 2020 to allow for further assessment of the rule’s impact, and recommended grandfathering all arrangements and transactions that were entered into before June 9th.

IRI surveyed its members last month and reported that approximately 155,000 clients have been dropped and “far more” accounts are expected to be impacted with the full implementation of the rule.

They found that more than 60 percent of the participating distribution firms have, are planning to, or are considering exiting or de-emphasizing target markets such as small IRA holders and small retirement plan sponsors.

The survey revealed that IRI’s insurance company members have spent an average of $10 million on implementation, while its distributor members have spent an average of $14 million.

Approximately half of the participating insurance companies reported that some of their distribution partners have dropped products from their shelf as part of their implementation efforts.

The group believes that the current definition of fiduciary is “overly and inappropriately broad” and favors a more precise definition that focuses on conduct, rather than all manner of sales activities.

“Advisers and financial institutions should be required to adopt policies and procedures designed to put their clients’ interests first, but should not be expected to completely disregard their own legitimate business interests,” IRI said in its comment letter.

The Insured Retirement Institute represents the retirement income industry, including insurers, banks, asset managers, broker-dealers, distributors, and financial advisors.

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Article by: The DI Wire


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