Women at retirement age, those between the ages of 60 and
75, understand the components of retirement income far less well than men of
the same age, although even men don’t grasp the topic very well, the RICP
Retirement Income Literacy Survey from The American College of Financial
Services found. Only 18% of women passed the quiz, compared to 35% of men.
A mere 16% of women answered questions about annuity
products in retirement correctly, compared to 24% of men. When it comes to
strategies for sustaining income throughout retirement, 34% of women have a
handle on this, compared to 48% of men. Less than one-third, 31%, of women know
how to make investment decisions in retirement planning, compared to 49% of
men, and only 30% of women understand company retirement plans, compared to 40%
of men.
Only 33% of women said they are extremely knowledgeable about
retirement income planning, compared to 44% of men. There seems to be a
disconnect on this among women, as 55% said they are extremely confident that
they would have enough money to live comfortably in retirement.
Women did better when it comes to long-term care expenses
and Medicare, with 38% of women understanding the importance of paying for
long-term care expenses (versus 35% of men) and 76% of women understanding Medicare
insurance planning, on par with men.
“Women face considerable challenges when it comes to
preparing for retirement, and lacking financial literacy certainly does not
help the cause,” says Jocelyn Wright, assistant professor of women’s studies at
The American College of Financial Services. “This is a problem, especially when
a female at age 65 can expect to live another 20 years on average, two years
longer than the average man. With this in mind, women cannot depend on their
spouse to hold the keys to their retirement. It is time to get smart on how to
navigate this complex and extremely important stage of life.”
Wright adds: “The results of this study reveal that women
continue to require more financial education and increased planning. Throughout
their lifetime, women will face challenges that include longer life expectancy,
lower income, increased need for long-term care, and they are more likely to
experience widowhood. Financial advisers can play an important role in helping
to close the retirement income literacy gap between men and women.”
Women who work with an adviser expect more from them than do men. Fifty-five percent of women with an adviser believe it is
important for advisers to educate them about the risk of running out of money in
retirement, compared to 42% of men, and 60% of women think it is important that
their advisers educate them about investment management, compared to 47% of men.
The survey was conducted in February among 1,244 adults between the ages of 60
and 75 whose household had at least $100,000 in investable assets, not
including their primary residence.
Strong Support Voiced for Further Fiduciary Rule Delay
The first of two deadlines has passed for the DOL’s
information request about a potential second fiduciary rule delay, but the
window is still open for advisers to address key aspects of the rulemaking.
Friday July 21st marked 15 days since the publication of a Department of Labor (DOL) request for information pertaining
to its ongoing expansion and strengthening of the fiduciary standard under the
Employee Retirement Income Security Act (ERISA).
Galling some industry providers, the first portion of the RFI
only allowed for a 15-day comment period. The short comment period, as laid out
in the text of the RFI, applied to Question 1, relating strictly to the idea of
delaying the January 1, 2018, applicability date of certain provisions of the expanded
fiduciary rule.
The agency’s wider RFI seeks input regarding potential new
and amended administrative class exemptions from the prohibited transaction
provisions of ERISA and the revenue code that were published in conjunction
with the fiduciary rule expansion. Commentary on these matters is due within 30
days—on or before August 7, 2017. Among other considerations, the DOL seems to
be curious how recent product development
of “clean shares” and zero-revenue sharing investment approaches may impact
the fiduciary landscape.
DOL officials have publically
acknowledged that a “number of stakeholders … have requested a longer
period in order to gather evidence and respond with new information.” The department
encourages commenters to submit responses within the initial timeframes to “ensure
their consideration as part of an expeditious process.” Nevertheless, the department’s
examination is “ongoing, as is its consideration of possible proposals for new
exemptions or revisions to the Fiduciary Rule and PTEs. Accordingly, if
commenters submit thoughtful comments on questions 2-18 after August 7, 2017,
the department will endeavor to consider those comments.”
Many of the public
comments submitted so far regarding Question 1 clearly favor further delay in
the January 1, 2018, applicability date for the more laborious requirements of the
DOL rulemaking. By way of background, the fiduciary rule and PTEs had an
original applicability date of this April 10, 2017. However, a
February memorandum from President Donald
Trump directed the agency to analyze the rule’s likely impact on the
access to retirement information and financial advice. In response, EBSA delayed the applicability date of
the final rule to June 9 and asked for additional input, while also introducing
transition provisions to simplify compliance efforts.
All told several thousand comments have been submitted
throughout this lengthy process—and it’s clear that even more industry
commentary is coming. For example, the U.S. Chamber of Commerce notes in its
latest comment letter that the current transition fiduciary rule has been in effect
for “only a short period,” and its full consequences—intended and unintended—are
not immediately apparent.
“We are concerned that the truncated 30 day comment period
for questions 2 through 18 will inhibit the ability of commenters to gather
meaningful data that is responsive to the questions posed in the RFI,” the
Chamber argues. “As such, we respectfully request that the DOL extend the
comment period for these questions to 60 days so that commenters are afforded
sufficient time to gather evidence and respond to the RFI. The requested
comment period extension will allow the concerned public necessary time to
observe the impacts of the rule more fully. The Chamber, and other interested observers,
have already initiated data collection efforts to monitor and evaluate the implementation
experience. These efforts will yield important new empirical evidence of the
actual effects of the rule.”
NEXT: The argument
for further delay
The argument for delay of the requirements coming into play
January 1 are summed up nicely in T. Rowe Price’s comment letter: “We believe
that the fiduciary advice rule and accompanying exemptions are not ready for
full implementation. More importantly, we believe that the fiduciary advice
rule is not ready for full enforcement by the Department of Labor. We urge the
department to consider extension of its temporary enforcement policy announced
in Field Assistance Bulletin 2017-02 (May 22, 2017) at the same time it
evaluates the deadline for full compliance with the exemptions accompanying the
rule.”
The letter continues: “The full applicability of the Best Interest Contract Exemption is
important not only to those who intend to use it, but to all industry
participants as well as advice recipients. This exemption is central to how
many firms will deliver advice to retirement plans and investors and, more
importantly, is the exemption with the single biggest potential impact on
advice recipients because of the extensive disclosures required. Implementing
the full exemption in its current form will affect the marketplace for advice
and its availability, and may impact retirement investors' receptivity to
advice. Accordingly, we encourage delay in full implementation.”
“The SEC has now issued a statement seeking public comments
on the standards of conduct for investment advisers and broker dealers when
they provide investment advice to retail investors,” T. Rowe Price observes. “Coordination
suggests that the Department of Labor should await the SEC's receipt and evaluation
of information.”
Comments submitted by the Financial Services Institute (FSI)
echo those points, arguing that if the full fiduciary rule is to be implanted at
all, its member firms and the wider industry would need, at minimum, 36 months to comply.
“Although our members are working diligently and in good
faith to comply with their fiduciary duties and to meet the conditions of the
prohibited transaction exemptions, they report that it will be extremely challenging or even impossible to
achieve full compliance with the fiduciary rule by [January 1],” FSI warns. “This
is due to the complexity inherent in the fiduciary rule, the sequential nature
of many of the work streams necessary to develop required systems and a desire
by firms to make use of recent, but not yet widely available, innovations in
the financial services industry to facilitate compliance. Therefore, for the
reasons explained more fully below, we suggest that the applicability date of
the rule be delayed until April 10, 2019 to provide the industry the full 36
months we said at the outset was necessary to fully comply with the fiduciary rule.”
Many of the commenters will be happy to hear how, at the
2017 PLANSPONSOR National Conference (PSNC), held in June in Washington D.C.,
Timothy Hauser, deputy assistant secretary for program operations of EBSA, indicated the staff of the DOL still views the final
form of the fiduciary rule as subject to substantial change. He assured attendees that DOL would carefully consider this latest round of industry comments.