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May 07, 2015 at 05:02 AM
While more than a dozen financial trade associations have urged the Department of Labor (DOL) to provide more time for the public and financial services industry to comment on a recently proposed change to the fiduciary standards, not everyone believes an extension is necessary, and some would prefer the agency get on with it.
The associations, including the Financial Services Roundtable (FSR), insist that the 75-day comment period on the proposed rule change is inadequate to address “the far-reaching modifications that will be required to meet the conditions to the exempted relief that DOL perceives as important,” to protect the needs of retirement investors, they wrote collectively, as previously reported by ThinkAdvisor.
The DOL sent its proposed rule change to the Office of Management and Budget for regulatory review in February. Following that ensuing review period, DOL released the proposed standard change to the public on April 14. That started the 75-day review period currently underway. Written comments are due by July 6.
The associations want a 120-day public review period instead, which they said would help advisors and consumers better review the fiduciary standards proposal – more than 1,000 pages in length.
Under the proposed rule change, all professional retirement advisors, which include brokers, financial advisors, insurance agents and others, would have to adhere to the fiduciary standard. That means that when they provide advice, they must do so with the client’s best interests at heart. They must disclose any potential conflict of interest toward that goal.
The proposed standards change would also establish several prohibited transaction exemptions that would allow retirement advisors and service providers to continue arrangements such as revenue sharing and fees. A “best interest exemption contract” would enable financial advice firms to continue setting their own compensation practices as long as they do not violate that client-first mandate.
A new “principles-based exemption” would allow advisors to recommend certain fixed-income securities and sell them to from their own inventory to an investor.
Not impacted by the rule change would be appraisals or valuations of employee stock plans of advice provided by call center employees.
Financial Services Firms Fear Legal Risks
In announcing the joint trade efforts to seek more time to comment, the Financial Services Roundtable also urged the DOL “not to propose any rule that would make professional financial advice more expensive or out of reach for workers and middle class Americans who need it most.”
Between one-third to one-half of all Americans have nothing saved for retirement and many more are not saving enough to maintain their present quality of life after they retire, according to the roundtable.
