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November 04, 2014 at 11:17 AM
The neverending speculation about when the Department of Labor might finally issue a new fiduciary standard came into play once again this week at the 2014 SPARK Institute conference.
This time, it was Groom Law Group Chairman Steve Saxon, one of Washingtonian magazine’s top 20 Influential Persons in the retirement services industry, doing the guessing and, if he’s right, it was good news for foes of the idea.
According to Saxon, even if the DOL releases its rules early next year, as many expect, there’s a decent possibility that it won’t have enough time to finalize the regulations before the Obama administration leaves the White House in early 2017.
How’s that possible? Why would it take two years to put the new standard into effect?
In Saxon’s way of thinking, the rule would no doubt get plenty of scrutiny in multiple hearings with extended testimony. The forces allied against it also will no doubt make repeated efforts to tweak it in their favor.
All of that takes time, he said.
“A lot of people in Washington are working mighty hard to make sure that reg never gets done – including me,” Saxon said in delivering a regulatory update to conference attendees.
That said, Saxon also noted that Phyllis Borzi, an assistant secretary at Labor, has made the issue her “dominant” regulatory initiative and can be expected to continue her push.
Borzi, in fact, has spent four years battling the full force of the financial lobby and pressure from lawmakers of both parties over the rules. She believes people’s retirement savings can be eroded by high fees or unwise investments recommended by advisors with hidden incentives. That’s why she is pushing for brokers to be held to a legal standard that they must act in a client’s best interest, the obligation known as a fiduciary duty. Retirement advisors and their providers already are subject to that duty.
Firms including Morgan Stanley and Fidelity Investments say the change would hurt, not help, small investors.
Saxon said that because nothing has been finalized, there’s been a lot of speculation about provisions that might be included – much of it potentially wrong.
Still, he offered some of his own speculation including the notion that the new rules would mean anyone making a sales presentation would be “crossing the line” and be subject to the higher standard. “Your representatives, brokers and agents … could become conflicted whether they sell affiliated products or even unaffiliated products with different price structures,” he said.
The DOL, he said, also could decide that anyone who talks to a participant about rolling over an employer-sponsored retirement plan into an IRA would be subject to the fiduciary standard.
Saxon also complained that “things are not normal on the regulatory front right now,” because regulators in the past year have issued few advisories or field assistance bulletins.
