While the much-anticipated new fiduciary rule released Tuesday by the Labor Department received applause from industry groups and some lawmakers, the proposal is not without its critics.
Some predict Labor's new plan, the Retirement Security Rule: Definition of an Investment Advice Fiduciary, will face legal challenges as its predecessor rule did.
The proposals include a 60-day period for public comments. Labor also intends to hold a public hearing approximately 45 days after the proposals are published.
President Joe Biden said Tuesday afternoon at the White House that with the new fiduciary rule, his administration "is taking on what we call junk fees."
The administration's central concern, Biden said, is that while "most financial advisors give their clients good advice at a fair price and are honest with them, … that's not always the case. Some advisors and brokers steer their clients toward certain investments, not because they're in the best interest of the client, but because it means the best payout for the broker."
Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association, said in a statement that "upon initial review, we are concerned that the Department's newest proposal may go too far."
Since Labor first proposed a change to the definition of fiduciary, "the landscape has changed greatly," most notably with the introduction of the Securities and Exchange Commission's Regulation Best Interest, he said.
Reg BI, Bentsen said, "implemented a best interest standard that did not exist at the time of the 2015 DOL re-proposal and foundationally improved the protections in place for retirement savers. SIFMA long supported a best interest standard of care for brokers. That standard is now in place — it is robust and expansive with significant duties and obligations imposed on broker-dealers that unquestionably enhances investor protection."
Labor's new plan, Bentsen stated, "may go too far, inconsistent with existing federal regulations such as Reg BI and as a result could limit access to advice and education while also limiting investor choice in advisors."
Chris Iacovella, president and CEO of the American Securities Association, said in another statement that the Biden administration's "attempt to justify new rules for financial advisors as stopping 'junk fees' is purposefully designed to mislead to the American people," noting ASA's support for Reg BI.
"Similar to the Obama administration's DOL fiduciary rule, the Biden administration's fiduciary rule lacks any empirical and legal basis to be adopted as a final rule," Iacovella opined.
