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Compliance August 11, 2017
Financial Pros Say Fiduciary Rule Prevents Them From Serving Clients
Seventy-five percent say they will take on fewer accounts with $25,000 or less in assets due to increased costs.
Reported by Lee Barney
The Financial Services Roundtable (FSR) surveyed 600 financial professionals about the Department of Labor’s (DOL’s) fiduciary rule and found that 50% said it is preventing them from serving their clients’ best interests.
Furthermore, 75% said they will serve fewer clients with $25,000 or less in assets due to increase compliance costs and legal risks, and 37% said the fiduciary rule is impacting their work methods “a lot.”
Eighty-three percent said the rule will require their clients to sign more
paperwork or fill out more complicated paperwork. Thirty-five percent said
their clients have expressed their displeasure with the impact of the fiduciary
rule on their service or fees. FSR submitted these findings along with its comment letter to the DOL
following the regulator’s request for information (RFI) on the fiduciary rule.
“Properly taking into account the market reaction that followed the adoption of
the rule, FSR believes that the department will necessarily conclude that
appropriate revisions to the rule and the accompanying exemptions would create
a more efficient, effective and appropriately tailored regulation that will preserve
access to advice and choice of products and services that meet the particular needs
of each retirement investor, especially investors with modest account balances,” FSR’s letter to DOL reads.
FSR is asking DOL to delay the rule by 24, not 18, months “to avoid further confusion and disruption for retirement investors. A delay also would allow all regulatory agencies having jurisdiction over the products which are affected by the rule … to craft of regulatory regime that is logical in promoting the interests of retirement investors in having access to a wide array of investment guidance.” The DOL has already submitted a proposal to delay the transition period preceding full implementation of the rule to the Office of Management and Budget.
Furthermore, FSR says, “access to investment services for investors with modest-sized and small-account balances has been, and will continue to be, substantially diminished as a result of the best interest contract (BIC) exemption’s onerous compliance burdens and litigation risks. The result has been a reduction in access to professional assistance, more limited investment options and higher costs [which] will eventually lead to lower returns for retirement investors.”
The findings of FSR’s survey are here.