One of the most troubling elements of the Department of Labor’s (DOL) effort to redefine the term “fiduciary” in relation to IRAs and company-sponsored retirement plans is the Department’s complete failure so far to clearly define the problem it is trying to solve. More than a year after the DOL’s initial attempt to rewrite the rules for Main Street IRA investors and their advisors, we still do not know exactly what the Department hopes to accomplish with this initiative.
What we do know are the significant unintended consequences; that mandating a fiduciary standard for IRAs would have a profound negative impact on the 19 million American IRA investors. The DOL’s initial proposal would have forced already financially strapped Americans to pay dramatically higher fees for professional financial advice, and could have priced many of them out of the IRA market altogether.
With this in mind, more than 50 House Republicans and 30 House Democrats sent separate letters to the Department late last year, setting forth a clear set of common-sense criteria for the DOL to follow in its ongoing effort to rewrite the regulation. One of the most important items on the list is that the new rule must be carefully and effectively designed to address well-defined and documented problems in the retirement planning advice business.
How is the Department responding to this guidance in its efforts to rewrite the proposal? More than three months after a long, bipartisan roster of Congressional leaders reached out to express their concerns, we still don’t know. We’re simply told to sit back and wait.