A hearing Monday on the Department of Labor's proposal to amend the definition of fiduciary advice on retirement accounts, drew testimony on ways to fix the plan's Best Interest Contract Exemption, mandatory arbitration as well as whether the plan as proposed would prompt class-action lawsuits.
While the topics might seem dry to someone outside the industry, their importance was vouched for in opening statements by Phyllis Borzi, assistant secretary of labor for DOL's Employee Benefits Security Administration. She noted the hearing is "far from a dry exercise" in updating the 40-year-old Employee Retirement Income Security Act.
As ERISA stands now, Borzi said at the hearing at DOL headquarters in Washington, it's "too easy for advisors to evade fiduciary status and put the retirement investor first."
DOL, Borzi said, "has a straightforward goal" in its plan to amend the definition of fiduciary under ERISA: "We want to create an enforceable best interest standard that requires advisors to put their clients first. That's our North Star."
(See related ThinkAdvisor story, Democratic Senator Criticizes Fiduciary Rule as Hearings Near.)
As to the controversial exemption known as BICE, which requires brokers to have clients as well as potential clients sign an agreement before rendering advice, "timing is not as critical as the contract itself," noted David Certner, legislative counsel and policy director for AARP, who sat on the first panel. "When the contract is signed is less important than having the contract and [it being] enforceable," he said. "The signing of the contract can be later on when other papers would be signed in any arrangement."
Raymond Ferrara, chairman and CEO of ProVise Management Group and former CFP Board chairman, added that the way BICE is written now a contract would have to presented upfront "and that would be intimidating and uncomfortable for the client and us."
Indeed, Marilyn Mohrman-Gillis, managing director of public policy and communication for the Certified Financial Planner Board of Standards, added that existing clients could agree to a BICE contract through "notification or negative consent," while new clients, depending on the type, "could pick a time" as to when they'd sign a BICE agreement.
