The Financial Planning Coalition said it “applauds” the Department of Labor for its fiduciary rule on retirement advice, in the words of Marilyn Mohrman-Gillis of the Certified Financial Planner Board of Standards, lauding DOL for the “extraordinarily open” process it followed as it formulated the final rule.
Moreover, during a conference call Monday sponsored by the Coalition, three financial planners who are current and former leaders of Coalition groups reported that under the rule they will not only be able to provide retirement advice to investors at all asset levels but do so with only minor changes to their current business practices.
Mohrman-Gillis said that the coalition was “very pleased” that a number of “industry players” who had lined up against the DOL now seem more willing to operate under the rule, citing in particular LPL Financial and John Thiel of Merrill Lynch. “We’re hopeful that the tide has changed in the conversation,” she said, and that former opponents will “focus on implementing rather than opposing the rule.”
Responding to a question during the call, Mohrman-Gillis expanded on her prepared statement that “we must be careful” to monitor and oppose any “attempts to curtail the rule by lawsuits” and that the Coalition was “hopeful but vigilant” that the rule wouldn’t be forestalled in the courts or in Congress.
“We may well see a lawsuit challenging the rule in the courts,” she said, noting that House Speaker Paul Ryan has already said he would introduce legislation calling for congressional review of the DOL rule. However, referring to Ryan’s legislation, “we don’t expect that will succeed,” suggesting that even if passed by both houses of Congress, such a bill would be vetoed by President Barack Obama. Regardless, she said the Coalition and the rule’s proponents “need to continue to advocate and educate members of Congress” on the benefits of the rule.
In its process, Mohrman-Gillis said Labor “talked to everyone” with a stake in the rule’s outcome, and that in its final form the rule not only “closed loopholes in a 40-year-old law” but also “carefully balances the need for consumer protections while providing access to retirement advice” while mitigating conflicts of interest, ensuring that the best interests of clients are met and “maintaining a private right of action” for investors.
She praised DOL for lengthening the implementation timetable, providing “almost two years for full enforcement,” while also allowing advisors to market themselves, providing a “clear line between education and advice” and significantly “streamlining” the best interest contract exemption (BICE) process. Since final enforcement of the new rule doesn’t occur until January 2018, she said a new presidential administration “could complicate matters” when it comes to any challenges to the rule. “I don’t want to be partisan,” Mohrman-Gillis said, before saying that Hillary Clinton already said she supports the DOL and would expect that “any Democratic president would likely support” the rule. However, she said any president would also have “limited power” to undo the DOL rule.
The three CFPs on the call — Ray Ferrara of ProVise Management Group and former chairman of the CFP Board; Bob Gerstemeier of Gerstemeier Financial Group and former board chairman of the National Association of Personal Financial Planners, and Chris Draughon of First Coast Wealth Advisors and president of the Financial Planning Association’s Florida chapter, discussed how the rule would change their practices. They each expressed confidence that it would not place a serious compliance burden on them while it would allow them to continue to serve relatively lower-net-worth clients.
(The CFP Board, NAPFA and FPA comprise the Coalition.)
Essentially, they expect to make changes in their policies and procedures manuals, draw up a BICE and modify their existing investment advisor contracts with clients to comply.
Ferrara said he believes DOL’s rule “is needed to protect retirement assets” and that it’s “workable” while he believes its provisions “won’t get rid of advice for the middle class.” While he expects ProVise will “incur some costs in building a BIC,” there won’t be “significant upfront costs” for his firm, which he said gets its revenue from flat fees, from AUM fees and commissions. He also took issue with a common complaint of the DOL rule’s opponents.
“It’s not credible saying a fiduciary standard can’t be followed,” he said. “ProVise has done so for 30 years.”
— Check out SIFMA’s Bentsen: DOL Rule Will Have Unintended Consequences on ThinkAdvisor.