SIFMA Sends DOL Study About Fiduciary Rule Effects

By Rebecca Moore | August 10, 2017
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Cost of compliance for study participants is high. Respondents indicated that they spent approximately $595 million preparing for the initial June 9, 2017, deadline and expect to spend more than $200 million more before the end of 2017.  Multiplied industry-wide, that equates to a projected spend in excess of $4.7 billion in start-up costs relating to the rule, far-exceeding the DOL’s 2016 estimated start-up costs for broker-dealers of $2 billion to $3 billion. The ongoing costs to comply are estimated at more than $700 million annually.

In its comment letter, SIFMA also provided an explanation of why it is unnecessary to create a new private right of action to change the standard of conduct in the financial services sector; changes to the regulatory language needed to help make the rule work for retirement savers; comments regarding the exemptions; and a proposed new principles-based exemption that protects investors and provides certainty to service providers seeking to comply with the rule’s intent.

And, as did other commenters, SIFMA stressed the need to delay the January 1, 2018, applicability date, at least until the DOL can complete the comprehensive review of the rule as directed by President Donald Trump in February.

Just days after the final RFI comments were due, the DOL submitted a "notice of administrative action" to the Office of Management and Budget (OMB) indicating it will extend the transition period preceding full implementation of the expanded fiduciary rule to 2019.

“This proposed delay represents an important step in protecting Main Street Americans’ access to retirement planning advice, products and services. While the delay is significant, it is critical that the DOL uses the 18 months to coordinate with regulators, in particular the SEC, to simplify and streamline the rule,” Financial Services Institute (FSI) President and CEO Dale Brown said in a statement. “We are already seeing the effects of the rule limiting investor choice and pushing retirement savings advice out of those who need it most. We stand ready to work with the DOL, SEC and others to put in place a best interest standard that protects investors, while not denying quality, affordable financial advice to hard-working Americans.”

Professor Jamie Hopkins, Retirement Income Program co-director at the American College, said “The proposed delay was entirely expected. The delay is really more about giving the DOL time to rework the rule rather than companies really needing more time to prepare.”

Hopkins indicated there is an expectation that the private right to action through class action lawsuits will be removed from the rule, some product-specific changes will likely be built into the rule, and more and expanded exemptions from the general rule will allow many companies to keep doing business as they do today without significant change or interruption.

“The expanded fiduciary rule is likely here to stay, but its impact could be significantly reduced over the next few years if exemptions from the rule are significantly expanded. That is really what requires close attention and watching moving forward,” he said.