While we’ve written extensively on the NAIFA Blog about the expected SEC fiduciary rule, we’ve given less coverage to a proposal by the Department of Labor that would expand the definition of fiduciary for professionals who advise employee benefits plans and their participants or IRA owners.
Under the DOL proposal, many advisors who serve retirement plans or individuals saving for retirement would find themselves bound by a fiduciary standard and its associated costs and liabilities. Unless they obtain exemptions from the government, they would no longer be able to receive commissions as compensation.
The impact on consumers is likely to be substantial. As advisors’ liability and costs increase, many will not be able to afford to work with small accounts or individual retirement plan participants. These people, who arguably have the greatest need for help and advice as they plan for retirement, will have to go it alone. Small employers may decide to scale back their employee benefits plans rather than pay the increased costs.
Worst of all, DOL has done no economic analysis to determine the full extent of the proposal’s impact on middle-market investors. And they’ve offered no compelling evidence that consumers have been harmed under the current system, which has been in place since 1974.
NAIFA is urging DOL to reconsider its fiduciary proposal to ensure any rule will not deprive middle-market consumers of access to retirement planning service. Congress also needs to take a closer look at the issue to ensure DOL doesn’t overstep its authority.
Additional Resources:
Wall Street Journal letters to the editor.
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