DOL fiduciary rule expected today

Perez said some brokers sell inappropriate investments to retirement savers with “compound fees and costs that can linger like a chronic illness.” According to Obama administration economists, investors lose as much as $17 billion a year to inferior products and “backdoor fees.”

Also read: NAPA’s deep reservations about DOL’s broker rules

Under current rules, brokers can sell any product that is “suitable,” meaning it fits an investor’s needs and tolerance for risk. White House officials said that compensation model and the suitability standard allow brokers to recommend products that net higher fees or commissions without yielding better returns for investors.

Wall Street groups and brokers say the rule will impose added costs that will prompt brokers to drop client accounts with less than $50,000 of assets, leaving those investors to manage their own savings. Those investors pay less under the current business model than they would if brokers were required to work under a fiduciary duty, the industry says.

Perez said his department has spoken to brokerage firms and other regulators including the Securities and Exchange Commission. He said the proposal won’t ban commissions and that many investors would be better served by simpler products such as index funds.

“It is a false choice to suggest that the only way to continue the business of providing financial service advice to folks is the status quo,” he said. “I categorically reject that.”

The proposal has been under reviewe by the Office of Management and Budget for a little under two months. It was expedited by the OMB after President Obama endorsed the DOL’s approach in a speech at AARP’s headquarters on Feb. 23.

Once the OMB review is complete, as was expected Tuesday, a public comment period will commence. Challenges are expected from Wall Street, in the court of public opinion as well as potentially in the legal realm.