Home News SIFMA Comment Letters Critical of DOL Fiduciary Rule, Calls for Further Extension

SIFMA Comment Letters Critical of DOL Fiduciary Rule, Calls for Further Extension

Securities Industry and Financial Markets Association, a trade group representing the securities industry, submitted a comment letter to the Department of Labor regarding its proposed delay and reconsideration of its fiduciary regulation.

SIFMA AMG, which represents asset management firms, submitted a separate comment letter. In both cases, SIFMA and SIFMA AMG call for the DOL to delay the applicability of the rule beyond June 09, 2017 to allow for a “proper review” of the rule, consistent with President Trump’s February 3, 2017 memorandum.

The memo directed the DOL to examine the fiduciary rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.

“Notwithstanding the industry’s longstanding and continued support for a best interest standard, SIFMA continues to believe the DOL rule will do investors much more harm than good. As our letters clearly state, the evidence gathered as firms have moved to implement the rule shows the negative consequences of less choice, greater cost, and increased legal liability,” said Kenneth Bentsen, Jr., SIFMA president and CEO.

“The DOL’s rule has proven to be impractical, unrealistic and inconsistent with the new administration’s stated priorities and must be rescinded or revised,” said Lisa J. Bleier, SIFMA managing director and associate general counsel. “It will adversely affect the ability of millions of Americans to save for retirement, increase the costs of retirement accounts while limiting access to advice and products, and vastly increase the amount of litigation.”

The SIFMA comment letters state the following:

Limited Access to Services, Products and Retirement Savings Information

“In 2015, total retirement assets in plans and IRAs totally nearly $16 trillion, with more than $7 trillion held in IRAs. SIFMA believes that these accounts will be adversely affected by the rule, as retirement investors will lose the products and advisory services that are currently available to them.”

“Limited access to advice will harm retirement savers seeking to maximize returns, and that savers who work with a financial professional have more diverse portfolios and greater savings. Over the course of 30 years, more knowledgeable investors could have retirement funds that are 25 percent larger. Product choice will also be limited as some financial institutions have announced that they will limit the investment options within certain types and sizes of accounts.”

SIFMA Survey:

SIFMA’s comment letter included results from as survey of 25 financial firms representing its broad membership impacted by the rule and found:

· More than half the firms are considering moving IRA brokerage clients to call center services only. Of those limiting services, nearly three quarters would not permit small accounts to have advisory accounts.

· 44 percent anticipate that more than half of their clients could see a change in services; more than 50 percent anticipate offering only advisory services to some current IRA brokerage customers.

· 92 percent of the responding firms stated that their plans could limit or restrict products for retirement investors. As many as 11 million households could face fewer choices.

· Almost three quarters of the responding firms stated that their rule compliance plans could limit or restrict services available to retirement investors.

· More than 60 percent of the responding firms stated that they anticipate that some or all of the costs resulting from the potential increase in litigation and liability insurance may be passed on to clients.

Increased Litigation:

“SIFMA urges the DOL to recognize the enormous increase in litigation that would result from allowing parties to enter into an arrangement where they have different understandings of the services being provided.”

Problems with the Rule Itself:

“SIFMA addresses parts of the rule that it believes are not practical, not capable of ready compliance, not realistic, and not consistent with other financial regulation. SIFMA raises the rule’s clear lack of a seller’s exemption, negative impact on financial literacy, negative impact on rollover conversation, leakage and other concerns.”

Problems with the BIC Exemption:

“SIFMA calls for the BIC exemption to be completely overhauled, stating that it goes too far, offering solutions in search of problems, and creating more roadblocks than help for retirement investors.”

The DOL’s Outdated Economic Analysis:

“The basis for the DOL’s cost benefit analysis is too old to be reliable and it has been misapplied; it was outdated when used, and in light of huge changes being contemplated in the market, will only lead to flawed results. It fails to correct errors when the studies it relies on are updated or corrected. It fails to recognize retirement investor harm from lack of access to advice, reduced investment in equities, lack of guaranteed lifetime income, lack of disability income or long term care insurance.”

Click here to read the SIFMA comment letter.

Click here to read the SIFMA AMG comment letter.

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