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Regulation and Compliance > Federal Regulation > DOL

NAPA’s deep reservations about DOL’s broker rules

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SAN DIEGO – The National Association of Plan Advisors made something really clear Sunday: it has always embraced and will continue to support any government regulation that puts plan participants’ best interests first. Period.

That, however, doesn’t mean NAPA is whole-heartedly supporting the Department of Labor’s efforts to push forward with plans to impose the fiduciary standard on broker-dealers and anyone else in the financial services industry hoping to make money in the retirement plan business.

The fiduciary standard has long applied to retirement plan advisors, meaning they must put their clients’ interests ahead of their own. Broker-dealers, on the other hand, are held to a lower standard called “suitability.” Critics say brokers who work on commissions often steer clients to the mutual funds or other investments that pay them the highest fees. “Conflicted” advice, according to a White House memo leaked last month, is costing retirement savers more than $6 billion a year.   

NAPA has expressed some measure of reservation about the proposed rule before now. But it went further at its 401(k) Summit on Sunday, adamantly expressing its opposition to any provisions in the coming regulation that might in any way hamper advisors’ ability to offer retiring clients help when they shift savings out of their employer plans to an IRA.

Brian Graff, the CEO of the American Retirement Association, part of NAPA, said that, according to his best educated guess, that was precisely what the DOL was planning to do, although the agency itself has been tightlipped about what its regulation might allow or what it might prohibit.

Addressing the audience during the opening moments of the conference, Graff left an impression that regulators had shared with him some of those closely held details. Later, he clarified he was a “very good educated guesser.”

With years under his belt as a lobbyist, Graff is viewed by many in the industry as one of its best-connected legislative and regulatory observers.

In any case, there’s no doubting the point he was making: half of the nation’s employer-sponsored plans have no feature in place that allows systematic withdrawals by retirees, generally forcing participants to roll over their assets into an IRA.

NAPA fears the DOL will make it illegal for advisors to talk to those participants about their best options at a critical moment in their lives.

If it were to push forward, “we’re talking about pushing people out into the cold,” NAPA’s outgoing president, Steven Dimitriou, said.

The best outcome, Graff said, would be for the DOL to allow the relationship between an advisor and participant to continue – with robust disclosure of any new fees that the participant faces in executing a rollover.

Whether the DOL changes course won’t be known before it reveals its regulation, an event that Graff said he expects to happen in May.

NAPA, however, isn’t waiting for that moment before it pushes to make itself heard.

“There’s some sort of presumption (by regulators) that with products with different fees you’re somehow incapable of acting in the best interest of the client,” Graff said. “That’s just stupid.”

See also:

Regulators eye broker rule, interest rate rigging, big banks

Roth IRA changes to weigh for the 2014


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