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FSI-Oxford Economics Study Predicts Negative Impact of Retirement Security Rule

FSI-Oxford Economics Study Predicts Negative Impact of Retirement Security Rule. Broker-dealers, dol, department of labor, financial services institute, fsi, oxford economics, oxford, retirement security rule, investment advice rule, fiduciary rule, registered investment adviser, ria

In partnership with the Financial Services Institute, Oxford Economics analyzed the potential impact of the Department of Labor’s proposed Retirement Security Rule. The study – using data from independent financial service firms – determined that DOL’s proposed rule would result in significant costs, impose undue burdens, and adversely affect investors’ ability to access professional financial advice, products, and services.

The DI Wire previously reported on bipartisan concern with the Retirement Security Rule, also called the Investment Advice or Fiduciary Rule.

Findings of the latest study include:

  • Significantly higher costs than DOL’s estimates, i.e., $2.7 billion in the first year – 11 times DOL’s estimate. The rule will continue to cost $2.5 billion each subsequent year;
  • 120 million pieces of paper printed annually – in addition to electronic disclosures – to comply with the proposal; and
  • Too light a dismissal of the proposal’s impact on small investors, including unsatisfactory alternative options for these investors in terms of costs, conflicts, personalization, product shelf, etc.

Further, the FSI-Oxford study noted that DOL analyses of the proposed rule’s qualitative benefits relied solely on data collected before Reg BI and PTE 2020-02 went into effect and that proposed benefits are negated by a reasonable quantitative analysis of the costs. According to FSI, too, its members produce compliance costs that are greater than the costs estimated in DOL’s regulatory impact analysis.

“The study confirms our concerns about the DOL’s proposed Retirement Security Rule and its negative impact on the accessibility of financial advice for Main Street Americans as they prepare for retirement,” said Dale Brown, FSI president and CEO.

“If approved, the rule would impose unnecessary and expensive requirements on our members, further restricting Main Street American investors’ access to professional financial advice, products, and services. The proposed rule would impose unnecessary and expensive requirements on top of the existing requirements of current regulations like the [U.S. Securities and Exchange Commission] Reg BI and DOL’s PTE 2020-02. Given the findings of this study along with the concerns outlined in our recent comment letter, we urge the Department to withdraw the proposal,” he added.

Partial methodology: In consultation with FSI, Oxford prepared an online survey to representatives at FSI Member Firms. The survey was fielded between Nov. 20 and Dec. 6, 2023, and collected 15 responses from independent financial services firms that represent approximately 26,000 financial advisors. Respondents were asked about their expected costs to implement the proposed 2023 Fiduciary Rule, as well as their costs to comply with Reg BI, and, for upfront costs, with the vacated 2016 Fiduciary Rule and PTE 2020-02. Based on the estimated total costs for the respondents’ organizations, Oxford Economics calculated costs on a per-financial advisor basis. The median per-financial advisor cost was then scaled to project industry-wide estimates.

Financial Services Institute advocates on behalf of independent financial advisors and independent financial services firms.

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