DOL ‘Flexible’ on Fiduciary Rule, Perez Says

The Financial Planning Coalition, comprising the Certified Financial Planner Board of Standards, the Financial Planning Association and the National Association of Personal Financial Advisors, sent a 35-page comment letter "strongly supporting" DOL's proposed rule to amend the definition of fiduciary under the Employee Retirement Income Security Act.

"With ever-increasing responsibility for their own retirements and the need to choose from an increasingly complex set of financial products and services, retirement investors more than ever need competent financial advice that is in their best interest," the Coalition stated. "Yet the current regulatory framework allows advisors' interests to be misaligned with the interests of retirement investors; it does not require advisors to clearly and openly disclose the standard of conduct under which they operate or their actual or potential conflicts of interest; and it permits market practices under which retirement investors are simply unable to distinguish advisors who provide fiduciary-level services from those who do not."

The Consumer Federation of America praised DOL's redraft, stating in its comment letter that "because of loopholes in the definition of fiduciary investment advice under ERISA, broker-dealers, insurance agents and other sales-based 'advisors' are able to evade their fiduciary responsibilities to put the interests of their customer first. When they recommend high-cost, risky or otherwise inferior investments because they happen to be highly profitable for the seller, the retirement saver can end up paying a heavy price in the form of tens of thousands of dollars of lost retirement income." The DOL rule proposal, the consumer group said, "addresses this problem by closing loopholes in the definition of fiduciary investment advice while simultaneously providing relief that enables sales-based advisers to comply with their fiduciary obligations."

The Insured Retirement Institute, an annuity trade group, criticized DOL's plan, stating that its "overly broad definition of a fiduciary would deprive retirement savers of access to retirement information and inappropriately limit the availability of advice sources."

IRI is concerned that the amendments to a prohibited transaction exemption as currently proposed will limit the availability of lifetime income options for retirement savers. In the context of the IRA market, IRI states that "the exemption currently would only apply to fixed annuities. Variable annuities, like fixed annuities, offer guaranteed lifetime income features, which are a primary driver of their use by consumers. To ensure a continued robust market of lifetime income options for consumers, IRI has requested the proposal be revised to make relief under the exemption available to all annuities."

IRI also complained that the rule's best interest contract exemption is currently "unworkable" and must be revised to avoid disruption to the availability of annuities. "The BIC exemption as proposed fails to recognize that different products use different fee structures to account for the benefits the product delivers to consumers," IRI said. BICE "must be revised to account for the benefits products offer consumers, or the rule will skew the market by favoring some products regardless of their overall benefit to consumers."

— Related on ThinkAdvisor:

• SIFMA, U.S. Chamber Barrage DOL as Fiduciary Rule Comment Deadline Looms
• FINRA Blasts DOL's Fiduciary Redraft as 'Fractured, Confusing'