WASHINGTON BUREAU — A proposed definition of retirement plan fiduciary could limit consumer access to investment education and advice, according to officials at the National Association of Insurance and Financial Advisors (NAIFA).

NAIFA, Falls Church, Va., has weighed in on the issue in a comment letter signed by NAIFA President Terry Headley.

The Employee Benefits Security Administration (EBSA), an arm of the U.S. Labor Department, has been trying to update a multi-part list of rules for determining which plan advisors are fiduciaries.

Critics of the current definition say it is so narrow it leaves out individuals and companies that have harmed retirement plans, but critics of the proposed EBSA update say it could turn individuals and entities that do not seem to be fiduciaries and have no written agreements identifying themselves as fiduciaries into unintentional fiduciaries.

Headley says the definition expansion, which would affect advisors serving holders of individual retirement accounts (IRAs) as well as employer-sponsored plan participants, would impose “a thick new layer of regulation” on those who receive commissions while providing investment recommendations.

Researchers at LIMRA, Windsor, Conn., recently reported that commissions are the dominant form of compensation for advice given to middle-market investors, Headley says.

The LIMRA study shows that consumers who earn incomes in the middle-market range represent a

core client base for NAIFA members, Headley says.

“The proposed new definition would impose rules that would make it difficult for NAIFA members to serve those clients, thus reducing consumer access to affordable advice,” Headley says.

With individually directed defined contribution plans now dominant in the marketplace, “there is a strong and ever growing need for workers to have access to quality, affordable investment education and investment advice,” Headley says.

Headley also says that:

  • Retirement investors will lose access to investment recommendations without a robust seller’s exception.
  • The proposed fiduciary definition should not apply to IRAs
  • The proposed fiduciary definition is overly broad for any person making individualized investment recommendations.

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