SIFMA President Ken Bentsen says the final Department of Labor fiduciary rule “will have dramatic intended and unintended consequences for investors and the firms that serve them.”
In his opening remarks at today’s SIFMA Private Client Conference in New York, Bentsen said, “It is too early to make a definitive statement on the final rule’s actual effects and impact” given the “complexity and volume” of the rule, which runs around 1,000 pages.
He acknowledged that the DOL made changes from earlier versions of the rule, but repeated SIFMA’s concerns that the rule could end up raising costs and reducing choice for investors.
In addition, Bentsen, like Financial Services Institute CEO Dale Brown, questioned the need for the DOL fiduciary rule. “We remain concerned that the original premise for the rule lacked empirical basis.”
Bentsen also criticized “statements from the official sector suggesting that the brokerage industry’s business model ‘rests on bilking’ clients or that every mutual fund in every IRA … is excessively charged, when the facts say otherwise.”
Bentsen was referring in part to comments from President Barack Obama last year, repeated by Jeffrey Zients, director of the White House National Economic Council, on Tuesday when he and Labor Secretary Thomas Perez introduced the final fiduciary rule to the media.
“If your business model rests on bilking hardworking Americans out of their retirement money, then you shouldn’t be in business,” said Zients, echoing the president.
Such statements “malign an entire sector of the economy and by extension every professional employed in it,” said Bentsen.
He said the industry believes in “a higher standard of care when providing personalized investment advice” but prefers “the congressionally authorized approaches of the [Securities and Exchange Commission] taking such actions.”
The SEC has been working on its own fiduciary standard for advisors and brokers for years, but the DOL beat it to the punch.
As it stands now, IRAs are held to a fiduciary standard, but brokerage accounts are subject to the less stringent suitability standard, tweeted Michael Kitces, director of research for Pinnacle Advisory Group, blogger and publisher of the widely read Kitces Report covering the financial planning industry.
SEC Chairwoman Mary Jo White told Congress last month that the process of developing an SEC fiduciary rule was “complicated, not fast,” and that the agency’s rule would be different from DOL’s.
Despite his opposition to the DOL rule, Bentsen said it was final and SIFMA would now take the time to understand and implement it. To that end SIFMA plans to hold a one-day conference on May 11 with expert counsel, consultants and regulators, from the DOL, SEC and the Financial Industry Regulatory Authority to discuss the new rule.
“We don’t have to like everything in the release, [but] we do need to follow it,” Jim Weddle, managing partner at Edward Jones, told attendees at the SIFMA conference.
He said the financial advisory industry “did not do a very good job communicating concerns about the original proposal but now has a second chance … This time our compliance with new rules will grow the public’s trust and confidence in the work we do for them.”
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