Department of Labor Should Retain Access, Choices for Retirement Savers

Retirement savers have different needs when it comes to advice and guidance. So, it’s important that consumers have access and choice.

Some people practice a buy-and-hold strategy, engaging financial professionals who earn  transaction-based commissions. Others seek and pay for ongoing advice and management services from fiduciary advisers.

Retirement savers also seek to be treated fairly. The Securities and Exchange Commission’s (SEC) Regulation Best Interest (Reg BI) and the National Association of Insurance Commissioners’ (NAIC) revised model regulation on annuity transactions have raised the bar on sales professionals while ensuring savers retain access to, and information about, annuities. The SEC also clarified the duties of fiduciary advisers. And now the Department of Labor (DOL) has taken the stage.

After a decade of proposals, public comments, hearings, and its 2016 fiduciary-only advice rule being vacated by the Fifth Circuit Court of Appeals, the DOL is trying to sync its rules with Reg BI.  In addition to its new proposal for fiduciary advisers intended to align with Reg BI, the DOL last month restored the pre-2016 definition of what it means to “render investment advice” to retirement investors. That’s the good news.

Before it was vacated, the 2016 fiduciary-only rule restricted access to professional guidance, especially to retirement savers with low and moderate balances and buy-and-hold investors. Unfortunately for these investors, the DOL has offered some troubling commentary that blurs the lines as to who is considered a fiduciary.

In explaining how recommendations for rolling over retirement plan assets can sometimes lead to the “rendering of investment advice,” the DOL complicates rather than clarifies key aspects of the rule in a way that broadens its scope and limits access to non-fiduciary financial professionals.

It’s 2016 all over again.

The DOL has an opportunity to preserve consumer access and choice to fiduciary advisers and non-fiduciary financial professionals. The Fifth Circuit ruling provides a roadmap. The DOL must acknowledge the court’s ruling and impose fiduciary obligations on financial professionals who are paid to provide investment advice, not those who are compensated only for sales transactions. 

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Jim Szostek

Jim Szostek

Jim Szostek is Vice President & Deputy, Retirement Security at the American Council of Life Insurers (ACLI). He helps guide ACLI policy on legislation and regulations affecting the U.S. retirement system. Prior to joining ACLI in 2008, he held positions at CIGNA and The Hartford.

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