IRI, SIFMA and FSR Rip Fiduciary Standard

“We put this and other findings on our website, summarized it in our communications with the Department of Labor, and directed them to the online source in our formal comments submitted last April.”

In the most recent response, the IRI, SIFMA and the FSR warned that if the DOL imposes the fiduciary standard on ERISA-regulated products in the next version of its proposed rule and it becomes a final rule, the result “will be limited retirement planning help, as well as the guidance necessary to educate [investors] about the tax consequences of taking a withdrawal, loan or hardship distribution.”

It is unclear when the DOL will come out with its revised proposal.

The IRI, SIFMA and FSR letter said that by imposing such a standard, “Even simple discussions regarding saving in the appropriate retirement plan or helping clients make pre-tax or post-tax distribution decisions will become cost prohibitive or obsolete.

“These are education efforts undertaken by many advisors which could turn them into fiduciaries under the Department’s proposal which will then limit the availability of these services,” the letter said.

“This will impact individual retirement savings and needs to be assessed by the DOL to determine the cost of the proposal,” the letter said.

“Unfortunately we do not see any evidence in the request that the DOL sent to us that the Department is even remotely considering these costs,” the letter said. “Of course, if the Department already understands and concedes these costs, perhaps it has determined that no further data is necessary.”

The letter added that, in responding to the DOL’s request for data, it needs to generate an economic impact study of such a standard, the three trade groups said that, “Our members are extremely concerned that the Department is neither looking for the ‘right’ type of data to complete an appropriate regulatory impact analysis, nor do we believe that if it were to receive all of the data it has requested, it could analyze it in a manner that controls for outside variables.” 

The letter also says that the trade groups believe “the data requested will be of little use to the Department” in justifying the DOL’s stated goal of finding that a fiduciary standard is necessary to protect consumers when purchasing retirement investment products.

Moreover, the letter says, “The request does not differentiate between non-fiduciary advice and fiduciary advice, raising the question of accurate comparisons against a ‘control group’ population.”

Amongst other issues, the trade groups argue that the data requested would also not take into account the situation where an investor has multiple account types, one or more of which may be used for more aggressive and riskier investing.”