The Consumer Federation of America has come out swinging in favor of the Department of Labor’s proposed fiduciary rule.
In its latest foray, CFA has targeted three separate arguments made by the financial industry against the proposed rules, saying that rule makers can “safely ignore” them “as the last gasp efforts of industry to maintain a status quo that has been hugely profitable for them, but far less beneficial for the working families and retirees who struggle to afford a secure and independent retirement.”
That was how Barbara Roper, director of investor protection at CFA, opened her statement at the public hearing. She went on to explain.
The first argument, she said, is that the industry “supports a best interest standard, just not the apparently fatally flawed best interest standard” that is currently being deliberated.
Following that argument, she said, industry representatives “argue for broad new exemptions” for certain segments of the market, which would “recreat[e] … precisely those loopholes this rule was intended to close.”
She also called out FINRA for “basically suggest[ing] that ‘best interest advice’ and ‘suitable advice’ are really just two different names for essentially the same thing.” Roper added, “I can assure you that that’s not how investors see it.”
The second argument concerned the call for DOL to “step aside and let securities regulators take the lead” to “avoid … confusion….”
However, Roper said, because DOL “has gone out of its way to incorporate securities law principles as it was crafting this rule,” it has come up with something that “the SEC could do far worse than follow the Department’s lead” on “if it does eventually get around to drafting a fiduciary rule for the securities markets.”
The third argument concerns the issue of whether “many brokers will simply stop serving this market,” leaving investors, particularly “small savers,” in the lurch or paying high fees for advice.
Roper cited the regulation of all fee-based accounts as advisory accounts by the SEC. Industry representatives made “exactly the same arguments,” but “[b]rokers didn’t stop offering the accounts. On the contrary, there’s more money in fee-based accounts at broker-dealers today than ever before.”