Data & Research September 29, 2016

NAIFA Argues Fiduciary Rule May Limit Access to Retirement Advice

Nearly a quarter of advisers surveyed said the rule may cause them to lose all lower- and middle-income clients.

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Sixty-two percent of advisers believe the Department of Labor (DOL)’s fiduciary rule will damage their ability to serve clients, particularly those who are lower- or middle-income individuals, according to a new study.

The survey by the National Association of Insurance and Financial Advisors (NAIFA) examined the opinions of more than 1,667 of its members. The group found that more than 62% of advisers said the rule may push them to stop serving some or all of this clientele. Of those surveyed, 24.2% said they will lose all of their lower- and middle-income clients, while 41.3% said they will lose some.

“The DOL rule has a strong potential to be a very bad deal for consumers who are not wealthy, but who are trying to do the right thing for their families by preparing for the future,” says NAIFA President-elect Paul Dougherty. “Lower- and middle-income workers want and would benefit from the help of a professional adviser as they prepare for retirement, but they may find that help hard to come by under the DOL rule.”

According to the NAIFA survey, 56.7% of respondents said the fiduciary rule will have an entirely negative effect on business. The anticipated points of difficulty vary, with 49.5% percent saying they expect their compliance costs to go up significantly and an additional 29% reporting that they believe costs will rise modestly; meanwhile, 11% say they are not sure what the practical impact may be. Only 3% said the fiduciary rule’s effects are likely to be entirely positive.

“NAIFA members are dedicated to serving lower- and middle-income clients,” says Dougherty. “But much of this is out of the advisors’ hands. Several financial institutions have already said they will no longer provide retirement investment products because of the DOL rule’s compliance costs. Others may follow suit or restrict their business to wealthier clients.”

The research comes in the midst of controversy surrounding the DOL’s fiduciary rule, which goes into effect in 2017. In June, NAIFA “reluctantly” filed a lawsuit asking the courts to declare the rule arbitrary and capricious. The insurance advocacy group added to the list of organizations in the wider financial services industry who have filed lawsuits challenging the legitimacy of the fiduciary rule.