The claim by the brokerage and insurance industries that small savers would lose access to advice under the Labor Department's new fiduciary proposal "is little more than a scare tactic," Micah Hauptman, director of investor protection for the Consumer Federation of America, told Labor officials.
The federation is among 45 groups, some supporting the proposal and some opposing it, that requested to testify at the two-day online hearing, which started Tuesday and ends Wednesday.
The "cynical claim" that the rule will constrain advice access is based on the brokerage and insurance industries' 2016 fiduciary rule assumptions, which "are not applicable to the current proposal," Hauptman told Labor officials.
Labor's new proposal "broadly aligns" with the SEC's Regulation Best Interest, Hauptman said, "and there is no evidence that that rule has reduced small savers' access to investment recommendations. We expect the DOL rule to operate similarly, providing comparable protections to retirement plans and participants and to IRA investors."
Further, "many financial professionals already support and successfully operate under a strong fiduciary standard while serving clients of all means," Hauptman relayed.
"If some firms were to decide to pull out of the market, others would step in to provide high quality products and services without harmful conflicts," Hauptman continued.
The reality, according to Hauptman, is that "small savers have the most to gain from the DOL proposed rule. They can least afford to lose any of their retirement savings to bad advice, yet they are particularly vulnerable to the detrimental effects of conflicted advice."
DOL's new plan, Hauptman maintained, "would appropriately cover rollover recommendations, plan advice, advice about insurance and other non-securities, ensuring regardless of the type of investment professional a retirement investor works with or the type of product the professional recommends, their advice would be subject to a strong best-interest framework that ensures conflicts of interest do not taint their advice."
The Securities Industry and Financial Markets Association and the American Council of Life Insurers testified Tuesday that Labor's new fiduciary plan is inconsistent with the SEC's Reg BI and the National Association of Insurance Commissioners' Model Rule for Annuity Transactions, and would limit access to advice.
