The Insured Retirement Institute (IRI) is asking the Department of Labor to delay the applicability date of the fiduciary rule until January 1, 2020, adding that the rule has already prevented consumers from accessing products.
The rule, which requires financial advisers to act as fiduciaries and serve in the best interests of their clients in retirement accounts, went into partial effect June 9, with the rest of implementation slated for Jan. 18.
IRI would like the DOL to delay implantation until Jan. 1, 2020, to allow for further assessment of the impact of the rule.
Since June 9, IRI presented new information that shows that consumers are being prevented from accessing products and services.
“This new information shows the rule is already negatively impacting the ability of many American savers to maintain access to a wide range of financial products and services,” IRI President and CEO Cathy Weatherford said. “At a time when Americans are increasingly self-funding their own retirements, it is vital that access to advice and lifetime income products be preserved.”
Weatherford said the number of accounts that have been orphaned — accounts no longer serviced by an adviser, leaving investors on their own — has increased significantly due to the rule. A July 2017 survey of IRI members found that approximately 155,000 of their clients have already been orphaned, with more accounts expected to be impacted as implementation of the rule proceeds.
“IRI continues to urge the Department to delay the applicability date for all remaining aspects of the fiduciary rule,” Weatherford added. “Furthermore, we urge the Department to collaborate with the appropriate federal and state regulators – including the Securities and Exchange Commission (SEC) and the National Association of Insurance Commissioners (NAIC) — to develop a consistent and workable best interest standard that will allow consumers to access the advice they need to achieve a financially secure retirement.”
IRI also contends that the contract requirement and warranties in the BIC exemption are an unnecessary incentive to enforce compliance and should be eliminated.
The disclosure requirements under the BIC exemption are exceedingly and needlessly complex, require massive and expensive information technology re-design and build-outs to support, Weatherford said. These disclosure requirements, and those required under the amended PTE 84-24, should leverage existing disclosure requirements.
Further, fear of litigation is driving many plan fiduciaries to focus on fees to the exclusion of other important considerations, an outcome that is incompatible with the goals of the rule, IRI said.
Weatherford said the DOL should engage in a dialogue with the Securities and Exchange Commission, FINRA, as well as state insurance departments to establish consistent and clear standards for recommendations for all securities and insurance products.
IRI also believes the DOL should revise the definition of fiduciary and the impartial conduct standards.