“It’s like déjà vu all over again.”
Yogi Berra said a lot of things decades ago that seem apt today concerning the Department of Labor fiduciary rule. He also said “you can observe a lot by watching.”
It is amazing to observe the U.S. insurance industry sitting back doing virtually nothing as the DOL moves ahead with an investment advice proposal that threatens to disrupt our world.
It is well known the DOL has released a proposal that is unworkable for major segments of the insurance industry — especially the independent distribution channel. The department’s proposal would turn most insurance agents into fiduciaries, extend ERISA to 401(k) rollovers, and create a class prohibited transaction exemption that is designed for the securities industry but unworkable for independent agents. It is essentially the Obama Fiduciary Rule all over again.
The politics are complicated. The current Labor secretary, Eugene Scalia, who was instrumental in stopping the Obama rule, now is allowing his agency to proceed with an equally flawed proposal. The current administration that rails against excess regulation lets oxygen flow to a rule that is the epitome of bureaucratic creep.
Self-described consumer groups suddenly want delay because they think the proposal does not go far enough — though one activist admits she needs to rethink this position given industry opposition. Some industry groups support the proposal likely because they want to protect 401(k) plans from rollovers or get a leg up on the insurance industry — ironically, those are real conflicts of interest.
However, what remains most surprising is the insurance industry has not risen up more forcefully against this ill-conceived proposal. Industry-submitted letters with extensive concerns about the latest DOL proposal and those concerns were amplified at the recent DOL hearing. Yet the industry does little to create political pressure on the DOL.
There has been little lobbying of Congress and no grassroots other than efforts orchestrated by our organization, the Federation of Americans for Consumer Choice. It is hard to understand why industry as a whole, having won the battle at the Fifth Circuit, is content to sit back and risk losing the war by allowing DOL to turn agents into fiduciaries and create a regulatory quagmire never authorized by Congress.