With its new fiduciary proposal, one of the Department of Labor’s main goals is to ensure investors’ best interests aren’t hampered by advisors who, when giving advice, might also be serving their own personal interests. That was the message sent by Julie Su, acting secretary of labor, in a follow-up to her panel testimony this summer in the House of Representatives.
The DOL submitted its new fiduciary proposal to the Office of Management and Budget for review on September 9. The department says that different companies playing by different kinds of rules have created an unlevel playing field.
“Our concern consistently has been and continues to be with financial arrangements that can present conflicts of interest and the unlevel playing field that exists for different kinds of companies that give investment advice,” Su told members of the House Committee on Education and the Workforce following her testimony this summer, according to a transcript of her answers made available today.
Su was asked by lawmakers why the department “persists in creating a separate regulatory scheme that has been unstable and unpredictable” when the Securities and Exchange Commission and the National Association of Insurance Commissioners have issued rules that cover investment advice from broker-dealers and annuity sales by insurance agents.
Su said it worries her that “these companies have different regulatory obligations, even though they are all providing retirement investment advice.” That’s not fair to workers or companies, she said.
The annuities and broker-dealer industries are listening, meanwhile, and worry they could be hurt by any DOL effort to throw similar fiduciary standards on all their advisors, since they rely on regulatory exemptions for products sold on commission. The department made a similar attempt to give advisors fiduciary constraints in a 2016 rule that has since been overturned by an appeals court. The industries say that new efforts to forge a rule could put up barriers between them and customers who might indeed need their services and products.
“If the rule is allowed to proceed in the form described by the DOL’s responses to the Education and Workforce Committee, then millions of consumers will suffer the consequences of losing access to affordable professional financial advice,” said Wayne Chopus, president of the Insured Retirement Institute, in a statement today.
Su said in her testimony that as the DOL works on its new fiduciary rule, it is also working with the Employee Benefits Security Administration, which is evaluating available prohibited transaction class exemptions—such as those used by advisors and insurance agents when they sell commission-based products—to “propose amendments or new exemptions” in order to ensure consistent protection of employee benefit plan and IRA investors.
The department is also coordinating with the Securities and Exchange Commission to ensure that any new fiduciary rule “appropriately reflects the changes that the financial services industry has made to comply with the SEC’s Regulation Best Interest,” Su said.
“The department,” she added, “undertakes rulemaking in a deliberative way. We are looking forward to engaging with the public on this issue and aim to balance the interests of the regulated community and those they serve. It is important that we ensure the security of the retirement, health and other workplace-related benefits of America’s workers, retirees and their families. This continues to be a priority for the department.”
