After much anticipation, Oliver Wyman released to the Department of Labor and the Securities and Exchange Commission on Thursday the data underlying its report stating that applying a fiduciary standard to individual retirement account (IRA) recommendations is costly.
As part of its economic analysis on the redraft of its rule amending the definition of fiduciary under the Employee Retirement Income Security Act (ERISA), DOL’s Employee Benefits Security Administration (EBSA) sent out two data requests: one issued on Dec. 16 for the data underlying the Oliver Wyman report, which was commissioned by 12 financial firms; and the second was a request from EBSA’s Office of Policy Research on Dec. 15 that industry trade groups voluntarily assist EBSA in its expanded “regulatory impact analysis.”
EBSA has complained about Oliver Wyman’s reluctance to release the data, but Kent Mason, a partner at the law firm Davis & Harman, who represents the companies that participated in the study, told AdvisorOne that a confidentiality agreement kept Oliver Wyman from releasing the data sooner.
A DOL spokesman told AdvisorOne on Thursday that the department had received the Oliver Wyman data and was reviewing it. Phyllis Borzi, assistant secretary for EBSA, has remained steadfast in her determination to include IRAs in the fiduciary duty redraft.
As Mason explained to EBSA’s Office of Policy Research in an April 5 letter, the data underlying the Oliver Wyman study includes information on over 19 million IRA holders who hold $1.79 trillion in assets through 25.3 million IRA accounts. This, he said, constitutes approximately 40% of IRAs in the United States and 40% of IRA assets.
In particular, Oliver Wyman was asked to evaluate the potential impact, if enacted, of the DOL’s proposed rule change on smaller retail IRA investors with respect to access to investment help and services from a licensed investment professional, choice of investment professional, relationship model in terms of commission-based brokerage versus single-fee, “wrap” investment advisory accounts, as well as breadth of product choice, and cost impact to IRA holders.
“We believe [the data] is compelling,” Mason told AdvisorOne. Brokers, he said, are “not opposed to being held accountable” under a fiduciary standard, but the concern they have, and the reason they want EBSA to revise its rule proposal, is “that under ERISA, unlike under securities laws, if the broker-dealer is a fiduciary then they would be prohibited from giving the investment services they give today” to IRA investors.