If It Ain’t Broke, Don’t Fix It
The phrase “If it ain’t broke, don’t fix it,” is often attributed to Bert Lance, director of the Office of Management and Budget (OMB) under President Jimmy Carter. Lance thought the federal government was trying to fix too many things that weren’t broken instead of fixing the things that were broken.
I hope that the current OMB respects the opinion of its former director.
The U.S. Department of Labor (DOL) recently sent a proposed regulation to the OMB for review. The last time the DOL put forward a fiduciary regulation in 2016, it included a strict fiduciary-only standard that made it harder for millions of Americans to achieve financial certainty.
Fortunately, the 5th U.S. Circuit Court of Appeals vacated that ill-advised regulation. But if the new DOL proposal is like the earlier one, it will once again prevent low- and middle-income Americans from getting the help they need to secure their retirements.
The consumer protection landscape has shifted markedly since 2016. There are now enhanced conduct standards that directly address the issues the DOL cited in its prior rulemaking.
In 2019, the Securities and Exchange Commission (SEC) introduced Regulation Best Interest to protect consumers. In 2020, the National Association of Insurance Commissioners (NAIC) adopted revisions to its annuity transactions model regulation that closely aligns with the SEC’s Regulation Best Interest. So far, 40 states have adopted laws and regulations enhancing protections for savers.
With these measures working together, savers can be confident that a financial professional is working in the saver’s best interest. But unlike a fiduciary-only approach, these measures ensure all savers can still access information about different choices for long-term security throughout retirement. This is especially vital for financially vulnerable lower- and middle-income Americans who lack the means to engage a fiduciary adviser, which often require account holders to make initial investments of $100,000 or more. A survey shows that retirement savers overwhelmingly prefer the option to work with any type of financial professional who is offering products and services that meet their needs.
The median household income of an annuity owner is $70,000. Any proposal that would make it more difficult for Americans to access the guaranteed income and peace of mind from annuities is misguided.
Because of the enhanced consumer protections from the SEC and states in recent years, there is no need for DOL action at this time. Let’s not fix something that isn’t broken, and instead work to ensure everyone has the opportunity to achieve financial certainty throughout retirement.