The Insured Retirement Institute (IRI) recently supported legislation drafted by U.S. Rep. Ann Wagner (R-MO), which would replace the Department of Labor’s fiduciary rule with a best interest standard.
The American Council of Life Insurers (ACLI) also testified in support of “reasonable and appropriately tailored” rules that require all sales professionals to act in the best interest of their customers.
Wagner’s bill would repeal the fiduciary rule, which went into effect June 9, with a best interest standard that establishes conduct for brokers and dealers that are in the best interest of their retail customers. The current fiduciary rule requires brokers to act in the best interest of clients in retirement accounts and would be enforced by the Securities and Exchange Commission or state regulators.
Opponents of the Wagner legislation, which is set to be voted on the House Financial Services Committee, said its consumer protections are not as strong as the current rule. Proponents said otherwise.
“IRI has previously noted in comment letters to the Department of Labor that the fiduciary rule has already had a detrimental effect on Americans’ access to financial advice and retirement investment products,” IRI president and CEO Cathy Weatherford stated at last week’s House Financial Services Committee Subcommittee on Capital Markets, Securities, and Investments hearing on the rule.
IRI called the rule overly burdensome and too complex and commended Wagner’s best interest standard. Weatherford said IRI has long advocated for the adoption of a consistent best interest standard which preserves access to retirement advice and a wide array of financial products.
ACLI representative Mark Halloran, head of industry and regulatory strategy at Transamerica, told the subcommittee that the Securities and Exchange Commission and state insurance regulators, not courts, are best positioned to enforce a best interest standard.
Halloran argued that the DOL’s fiduciary rule harms middle income savers and limits consumer choices. “Under the DOL regulation, an advice gap has developed for small and medium retirement account holders who do not meet higher account minimums for fee-based arrangements,” Halloran said.
He said the Wagner bill would protect the interests of retail investors, governing the totality of a broker-dealer’s securities relationship with a retail investor; not just the portion of the relationship that pertains to ERISA plan and IRA recommendations.
The discussion draft “sensibly places responsibility for issuing regulations in the hands of the primary regulators, the SEC and state insurance regulators. The draft would also place a statutory obligation on the SEC to coordinate and cooperate with state insurance regulators,” Halloran added.
Halloran also said the Wagner legislation “will stabilize the marketplace for the delivery of retail financial products and services to consumers and will benefit consumer interests by restoring freedom of access and choice.”