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Sen. Warren Questions Firms on Their DOL Fiduciary Prep Ahead of Possible Delay

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Sen. Elizabeth Warren, D-Mass., sent a letter on Thursday to 33 financial firms asking them whether they support delaying and rolling back the Department of Labor’s fiduciary rule, as the rule could suffer such a fate Monday.

The letter — which was sent to such firms as Morgan Stanley, Raymond James, Charles Schwab & Co., Fidelity, BlackRock and TD Ameritrade — comes on the heels of reports that the incoming Trump administration will seek to delay the rule, Warren said.

“As you know, the United States faces a retirement crisis,” wrote Warren, a member of the Senate Banking Committee. “With rising costs, and flat wages, it’s harder than ever for Americans to save. I think we can agree that the very least we should do is ensure investment advisor fees, commissions and kickbacks aren’t draining away the money Americans do manage to save. DOL’s rule does just that.”

“Any efforts to roll back these new protections” under DOL’s rule, Warren wrote, “will be devastating to consumers.” Also, she said, rolling back the rule would hurt the advisors and companies that have already begun implementing changes to comply with the rule, which takes effect on April 10.

Warren told the financial services firms that she’d like answers to six questions about the rule by Jan. 31, specifically, how much money they’ve spent on compliance, what steps they’ve taken to implement the rule, and if they plan to return more products to a commission-based model.

Micah Hauptman, financial services counsel at the Consumer Federation of America, told ThinkAdvisor on Thursday that “industry opponents have made no secret they want the new administration to delay ‘on day one,’” DOL’s fiduciary rule. “However, the president-elect has indicated that he doesn’t plan on taking any official administrative actions until Monday.”

Hauptman added that any “action that the industry opponents have been calling for would violate the Administrative Procedures Act.”

Misleading Marketing

CFA and Americans for Financial Reform released a report on Wednesday, written by Hauptman and Barbara Roper, CFA’s director of investor protection, which scrutinizes how brokerage firms and insurance companies market their services on their website and “contrasts the practices they use to attract customers with those they use when resisting regulation as fiduciary advisors.” “Brokerage firms repeatedly, and in a variety of ways, characterize themselves as trusted advisors, while financial industry lobbyists argue in court that they are ‘merely selling a product,’” the report states. 

CFA and AFR state that their review “comes as some in the brokerage and insurance industries are working feverishly, in court, on Capitol Hill and at the Department of Labor itself, to overturn a rule requiring financial professionals to act in the best interests of their clients.”

A review of prominent firms’ websites did not find any notable reference that labeled their representatives and agents as salespeople. Instead, the report states, firms have adopted titles for their financial professionals that identify those individuals as advisors:

The title most commonly adopted by financial firms for their financial professionals appears to be “financial advisor,” the report states.  

According to the report, firms that use this title (or a variation of it) include: Janney Montgomery Scott, D.A. Davidson, Stifel, Wells Fargo Advisors, HDVest, Baird, Raymond James, Ameriprise, Edward Jones, BB&T Scott and Stringfellow, Chase, UBS, Morgan Stanley, SignatorOne (formerly John Hancock), Lincoln Financial and VALIC.

While “financial advisor” appears to be the title most commonly used by sales-based professionals, other firms have adopted variations that create a similar impression, states the report.

For example, Schwab, Stephens and Hilliard Lyons all use the title “financial consultant.” Hilliard Lyons also uses the title “chartered wealth advisor.” Voya uses the title “retirement consultant,” USAA uses “wealth manager,” and Prudential uses “retirement counselor.”

Said Roper: “It comes down to this: Are they financial advisors or are they just salespeople? Put another way, are they lying to the court, or are they lying to their customers? The answer to that question has multibillion-dollar implications for millions of American workers and retirees who turn to financial professionals for help with their retirement investments. After all, people expect salespeople to look out for their own interests and maximize profits, but advisors are expected to meet a higher standard.”

— Check out Trump Appoints CFPB Critic; Sen. Warren Rallies Support for Agency on ThinkAdvisor.


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