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Arguments continue over DOL’s fiduciary proposal

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Arguments for and against the Department of Labor’s fiduciary proposal continue to draw attention. Some statements highlight the potential for a significant negative impact on advisors and insurers that sell annuities to retirement plans while others maintain those claims are overblown. 

In an effort to present a balanced perspective, I asked the Coalition for Financial Planning (“Coalition”), which supports the proposal, to respond to two key criticisms from the National Association of Insurance and Financial Advisors (NAIFA) blog post, “Here’s why the DOL fiduciary proposal would have a huge impact on advisors and investors.”

NAIFA statement No. 1:

“As currently written, the proposed rule is unworkable for retirement savers and their advisors. It would fundamentally change the way advisors do business, disrupt long-established client-advisor relationships, increase costs for advisors and consumers and prevent advisors from providing retirement investors with certain types of important advice and services.”

Coalition response:

“The DOL’s re-proposed fiduciary rule is both workable and essential; consumers want and benefit from financial advice that is in their best interest, not their advisor’s bottom line. At its core, the rule would protect them by realigning the rules for retirement advice to better reflect today’s reality, in which Americans are responsible for their retirement security. The rule would also preserve advisors’ flexibility and adaptability without negatively altering their client relationships.”

NAIFA statement No. 2:

“The regulations would certainly reduce the availability of services and advice as some advisors would either shift their practices away from the retirement sector or would drop middle- and lower-market clients who would not be able to afford the increased costs. Consumers may find themselves unable to continue working with advisors they know and trust and may be unable to receive advice in a number of common, yet complicated, retirement-investment situations.”

Coalition response:

“That retirement advisors would walk away from a collective $14.4 trillion in 401(k) plans and IRAs is simply not credible. Existing and emerging business models — including those used by thousands of CFP® professionals and FPA and NAPFA members across the country — successfully provide low-cost service to middle-income Americans under a fiduciary standard of care. Further, research shows financial advisors who have switched to a fiduciary standard report an increase or no change in the number of clients they serve — including no change in middle-income clients. And while the CFP Board heard these same arguments when it established a fiduciary standard for CFP® professionals, the number of CFP® professionals has grown by more than 30 percent since then.”

If you want to read more about these organizations’ positions, you can find them online:

“Here’s Why The DOL Fiduciary Proposal Would Have A Huge Impact On Advisors And Investors”

Coalition’s letter to regulators