While the Department of Labor has received a “few valuable nuggets” on ways to improve its proposed rule to redefine fiduciary under ERISA, there are other suggestions DOL can “safely ignore” as it moves ahead to modify the rule, said Barbara Roper, director of investor protection for the Consumer Federation of America.
In her testimony during the four days of hearings held from Aug. 10-14 at DOL headquarters in Washington, Roper listed three areas that she argued are “last gasp efforts of industry to maintain a status quo that has been hugely profitable for them.”
First is the argument that the industry supports a best interest standard, “just not the apparently fatally flawed best interest standard you’ve put forward here,” Roper told DOL officials.
“I’d be prepared to make a small wager that virtually every industry representative who testifies here this week will, at some point in their remarks, profess their support for a best interest standard. Some of them may even mean it,” she said. But upon closer review, “there is considerably less there than meets the eye.”
For instance, the industry (meaning broker-dealers and insurers) would be happy to support a best interest standard, Roper said, “as long as it doesn’t cover the full range of services that retirement investors perceive and rely on as objective investment advice.”
Or, Roper continued, the industry will support a best interest standard as long as no one “actually expects them to seek to do what is best for the customer.” She went on to note her “shock” to see FINRA “make this argument in its comment letter, in which they basically suggested that ‘best interest advice’ and ‘suitable advice’ are really just two different names for essentially the same thing. I can assure you that that’s not how investors see it.”