Closing loopholes or blocking access? Reactions to the final DOL rule

April 25, 2024 4:17 PM

Supporters and opponents began weighing in with their reactions about a minute or so after the Labor Department issued the final version of its retirement advice rule earlier this week.

As shown by the roundup of 18 statements in response to the "retirement security rule" below, the groups praising the regulation include the AARP, the CFP Board, the National Association of Personal Financial Advisors and the Consumer Federation of America, while the ranks of those against it comprise the Insured Retirement Institute, the Securities Industry and Financial Markets Association, the National Association of Insurance Commissioners and other groups. The latter commenters will almost certainly file a lawsuit challenging the rule in court and push for Congress to use its power to block the regulation over the next two months.

Otherwise, the rule will expand the fiduciary duty requiring recommendations by financial advisors and other retirement professionals for rollovers from 401(k) plans to individual retirement accounts or certain insurance products to put a clients' best interest first.

The regulation takes effect Sept. 23, although some parts carry a one-year transition period after that date for full implementation, according to a Labor fact sheet. While many advisors already follow fiduciary standards with all of their clients, there is "always going to be a big impact" from rules of this kind on registered investment advisory firms and other professionals working with retirement savers, according to Leila Shaver, the founder of compliance firm My RIA Lawyer.

"It takes a lot of money to implement the processes and supervision required to comply with the rule," she said in an interview.

The rule entails "different work and disclosure" but "not necessarily more work and disclosure" for most advisors, according to David Lau, CEO of DPL Financial Partners, a fee-only insurance consulting network that RIAs use for annuities and other products without commissions. Asked about the likelihood that the industry will file a lawsuit to try to overturn the rule, Lau put the possibility at "about 1,000%," but he said that this regulation is "built better to stand up to challenge" than the one overturned by an appeals court decision six years ago.

"Retirement is such a critical and sometimes vulnerable financial time for a consumer," Lau said. "To require that they're getting fiduciary advice about such important decisions I think is such complete common sense."

In contrast to many other insurance groups that are decidedly hostile to the regulation, Lau rejected the suggestion that it could threaten access to advice about retirement products.

"Annuities are really important, good products," he said. "To have the confidence that you're going to be able to get them from a fiduciary in a low-cost manner will only help expand the industry over time."

Scroll down the slideshow to see reactions from 18 different advocacy groups, professional associations and government agencies. For a look at FP's analysis of the Labor Department's issuance of the rule, click here. And to look at two potential roadblocks to it going into effect ahead of the election, follow this link.

Department of Labor Employee Benefits Security Administration

"These new rules update regulations created nearly a half-century ago that simply are not providing the protections America's workers need and deserve for their retirement savings so that they can retire with dignity," Assistant Secretary for Employee Benefits Security Lisa Gomez said in a statement. "The investment landscape has changed, the retirement landscape has changed, and it is critical that our regulations are responsive to those changes so that workers can reach the secure retirement that they work for decades to finally achieve."

Trade group the National Association of Insurance and Financial Advisors

"NAIFA is very disappointed but not surprised that the Department of Labor has hastily published its final rule that places harmful restrictions on American retirement savers," CEO Kevin Mayeux said in a statement. "The fiduciary-only rule, if left in place, will curtail the ability of low- and middle-income consumers to get much-needed help with their retirement preparation. My latest testimony on the rule to the Office of Information and Regulatory Affairs resulted in no questions or comments from White House officials present. The abbreviated public comment period and lack of engagement were clear indications that the White House and DOL were merely going through the motions and had no intention of seriously considering our input."

AARP

"AARP is pleased that all financial professionals who provide retirement investment advice must now act solely in the best interests of their clients," AARP Executive Vice President and Chief Advocacy & Engagement Officer Nancy LeaMond said in a statement. "This rule closes legal loopholes that allowed some advisors to recommend investments with excessive fees and unnecessary risks, which collectively cost retirement savers billions of dollars a year, particularly affecting older Americans. We know there is a retirement crisis in America, and this rule — which AARP has long fought for — will allow more hard-working Americans to retire with dignity and financial security."

Registered investment advisory firm trade group the Investment Adviser Association

"Based on our preliminary assessment of the final rule, we note that the department made several important changes to the proposal, which are responsive to many of the IAA's requests," General Counsel Gail Bernstein said in a statement: "For example, the final rule confirms that investment education is not fiduciary advice, exempts advice to certain institutional investors, lightens the documentation burden for some rollover recommendations and reduces certain recordkeeping burdens. We are also pleased that the Department recognizes that robo-advisers should be treated the same as other fiduciary investment advisers. We are continuing to review the final rule and look forward to working with the Department as it looks to implement the rule."

Fee-only planner organization the National Association of Personal Financial Advisors

"NAPFA is one of 68 national organizations, representing American consumers, retirement savers, employees and households, who today commend the U.S. Department of Labor for issuing its new 'retirement security rule,'" the organization said in a statement. "As these national organizations have emphasized in today's joint letter to Congressional leadership, the new Retirement Security Rule will "help all Americans — many of whom are responsible for making their own decisions about how best to invest their retirement savings — keep more of their hard-earned savings so they can enjoy a more financially secure and independent retirement."

Insurance trade group the Insured Retirement Institute

"Based on our preliminary review, in issuing this unnecessary and redundant rule, DOL disregarded data showing how millions of lower- and middle-income consumers will be deprived of access to affordable retirement planning assistance," CEO Wayne Chopus said in a statement. "This rule is the product of a severely flawed rulemaking process and defies applicable judicial precedent and the limitations on DOL's rulemaking authority as established by Congress."

Independent brokerage and advisor advocacy group the Financial Services Institute

"We are carefully reviewing and analyzing the rule, however, we remain concerned that the final rule will have a negative impact on Main Street Americans' access to financial advice as they attempt (to) save for a dignified retirement," CEO Dale Brown said in a statement. "Our members already adhere to an extensive regulatory regime, including the U.S. Securities and Exchange Commission's Regulation Best Interest, and the DOL's existing PTE 2020-02. We are concerned that the new rule will limit retirement savers' access to professional financial advice, products and services offered by independent financial advisors and firms and create a more complicated, burdensome and costly regulatory environment."

Client lawyer group the Public Investors Advocate Bar Association

"The newly finalized DOL rule, which imposes a fiduciary duty on advisors, ensures that they will have to put their clients' financial interests ahead of their own," Joseph Peiffer, president of PIABA and founding partner of the Peiffer Wolf Carr Kane Conway & Wise law firm, said in a statement. "It's not a minor issue. Conflicted advice costs Americans billions of dollars a year. This rule will finally put a stop to that."

Advocacy group Consumer Federation of America

"Financial professionals, including most prominently insurance professionals, consistently characterize themselves as in relationships of trust and confidence with their customers who rely on their advice," Director of Investor Protection Micah Hauptman said in a statement. "These financial professionals' business models shouldn't be structured to bilk those customers out of a secure and independent retirement, then evade accountability for those actions."

Chair of the House Financial Services Subcommittee on Capital Markets

"Disguised as an attempt to eliminate so-called 'junk fees,' the Biden Administration's rushed rulemaking will leave millions of low- and middle-income retail investors without access to sound investment advice, forcing them to endure higher costs, fewer choices, and reduced service," Rep. Ann Wagner, a Republican from Missouri, said in a statement. "This reckless decision is yet another overreaching mandate from Joe Biden's Department of Labor that does nothing to actually protect consumers, but instead prevents them from making the best choice for their families."

Ranking Democrat on the House Financial Services Committee

"It is way past time for the federal government to close the long-standing loopholes to ensure that financial professionals give advice that is prudent and not harmful to workers, investors, and retirees," Rep. Maxine Waters of California said in a statement. "I commend the DOL for its thoughtful and deliberative approach to rulemaking — including clarifying the rules in areas that members of the public highlighted and staying squarely within its authorities. Now, the DOL must prioritize the enforcement of this rule so that its benefits can be quickly felt by retirement savers."

Professional development and certification organization the CFP Board

"Workers and retirees deserve a financially secure and dignified retirement," the organization said in a statement. "The DOL's 'retirement security rule' will provide investors with faith that their financial professional is delivering retirement investment advice in their best interest so that they can achieve their investment and retirement goals confidently and ethically. We look forward to offering more detailed comments after a careful review of the final rule."

Brokerage, investment bank and asset manager trade group SIFMA

"We are closely examining the details of the final rule released today. As proposed, the rule conflicted with existing federal securities regulation — specifically Regulation Best Interest – and would likely limit investors' access to advice and education," Securities Industry and Financial Markets Association CEO Kenneth Bentsen said in a statement. "Stakeholders have been quite explicit on the need to address these conflicts and we will be reviewing the conflict-related text as well as other relevant text on the material flaws we raised in our comments."

Consumer financial reform organization Better Markets

"These reforms will improve the lives of millions of Americans struggling to save and invest for a financially secure and dignified retirement," Better Markets Legal Director and Securities Specialist Stephen Hall said in a statement. "The final rules will require all financial advisors to act in the best interest of their clients when they give advice about retirement investments. They are designed to impose minimal compliance costs while closing huge, 50-year-old loopholes in current rules and strengthening the steps advisers must take to ensure their conflicts of interest don't contaminate their advice. It's fundamentally fair, it's what Congress always intended, and it's what every American thinks they're already receiving from their financial advisors."

Regional financial service firm trade group the American Securities Association

"The Department of Labor's fiduciary rule sequel is just as bad as the original, and just as likely to meet the same fate in court," CEO Chris Iacovella said in a statement. "The department's rushed rulemaking process will threaten retirement savings and limit access for millions of hardworking Americans. ASA will assess the rule and work with our members to determine how to protect the interests of America's investors, including potential litigation."

Asset manager trade group the Investment Company Institute

"ICI is reviewing the DOL's final rule, bearing in mind the concerns we raised with the agency that it may raise costs and interfere with middle-class savers' access to the guidance, products, and innovative tools they rely on to meet their retirement goals," CEO Eric Pan said in a statement. "We have always strongly supported the principle that financial professionals should act in their clients' best interests when offering personalized recommendations, as the SEC's Regulation Best Interest for broker-dealers already requires. We will examine the rule in detail to see how the DOL has responded to the hundreds of comment letters it received providing detailed public input on the proposal."

State regulator organization the National Association of Insurance Commissioners

"We continue to have significant concerns about the potential impact of the Department of Labor's final fiduciary rule on access and choice for American retirees to certain life insurance and annuity products," the organization said in a statement. "These products have been recognized by multiple administrations of both political parties as an important option for retirees to manage their risk of outliving their savings. The final rule, which was rushed through the administrative process at DOL and the Office of Management and Budget with virtually no coordination with state insurance regulators, also discounts the work of 45 states and counting to enhance consumer protections for these products by adopting the NAIC's Suitability in Annuity Transactions Model Regulation, which extends a level playing field to products sold within and outside a retirement plan."

Alternative asset manager trade group the Institute for Portfolio Alternatives

"Early on in the process, we expressed to the Department of Labor our concerns that the new rule would have unnecessary consequences for retirees and investors," CEO Anya Coverman, president & CEO of the Institute for Portfolio Alternatives. "We have been concerned with the unprecedented speed of the process, given the ramifications we have projected this new rule to have. As the analysis of this latest rule continues, we look forward to participating in the ongoing dialogue to limit any uncertainty for firms, advisors and their clients."