Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
By Sean Forbes
There’s dissension in the retirement investment adviser ranks about the Department of Labor’s conflict-of-interest rule--at least among those that have weighed in on the agency’s proposal to delay it.
Under the umbrella organization called the Financial Planning Coalition (FPA), the Certified Financial Planner Board of Standards has long argued strongly in support of the Obama-era fiduciary rule, but some advisers with a CFP designation support President Donald Trump’s directive to the DOL to consider whether to revise or rescind it.
Those advisers have expressed their dislike for the rule through comment letters submitted in response to the Labor Department’s proposal to delay the applicability date from April 10 to June 9.
The DOL’s rule requires financial advisers to retirement investors to act in their clients’ best interests. Commission-based advice is permitted, but advisers must sign contracts with their clients to sell such products. The rule relies on the courts to enforce the standard by allowing individual investors to form class actions.
As of March 9, the DOL made public 285 comment letters that it has received about the proposed delay. That’s just a small fraction of the nearly 4,500 comments submitted since March 1. Of the publicly available comments from advisers with a CFP designation, most argued in favor of the delay.
Those who support the delay cite reasons such as that the rule limits the types of products they could recommend, and that a shift toward fee-based advice isn’t always in a client’s best interest.
“Due to the Rule’s requirements that compensation be level within a product category (ex. Fixed Index Annuity product category), Ladenburg will be forced to significantly reduce retirement products available to investors,” Doug Baxley, vice president of retirement and fiduciary services at Ladenburg Thalmann Financial Services Inc., in Miami, said in his letter.
The rule might also hinder holistic advice to help with family counseling in the face of the wide variety of possible life circumstances, said William M. Keen, an officer for supervisory jurisdiction for the Strategic Financial Alliance, in Atlanta. “These services CANNOT be paid for by a fee by most of our clients,” Keen said.
Michael R. Mason, president of Mason & Associates LLC, in Newport News, Va., echoed the concern that the rule appears to favor fee-based advice, but also saw a need for tougher industry standards, especially for life insurance agents. He argued for a revision of the rule that would prevent “minimally licensed insurance agents” from selling “big commissions annuities.”
But not all advisers want to see the delay. For Kay Conheady, a principal with Rush, N.Y.-based Apropos Financial Planning, there’s no reason for delay even though the rule isn’t in her own best interests. “Let’s just do this already,” she said.
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