“Don’t throw out the baby with the bathwater” is an old — perhaps worn-out — cliché, but nevertheless sometimes it’s apt. And as the Obama Administration unveils the fiduciary rule reproposal, ASPPA CEO and Executive Director Brian Graff has warned that the regulations could have serious and negative consequences.
In remarks at AARP’s Washington, DC headquarters on Feb. 23, President Obama touted the fiduciary rules as building on other consumer-related initiatives his administration has taken and a way to help encourage and enhance retirement saving.
Obama acknowledged that not all advisors are unscrupulous. “On average, conflicts of interest in retirement advice results in annual losses of 1 percentage point for affected persons,” he said, adding later, “I want to emphasize once again, there are a whole lot of financial advisors out there who do put their clients’ interests first.” At the same time, however, he called it a “challenge” that “there are no uniform rules of the road that require retirement advisors to act in the best interests of their clients,” something he said is “hurting millions of working and middle-class families.”
In remarks concerning the proposed rule, Graff warned that “but all indications are that this rule will block Americans from working with the financial advisors and investment providers they trust simply because they offer different financial products — like annuities and mutual funds — with different fees. This rule could even restrict who can help you with your 401(k) rollover.
“The best way to address concerns about ‘hidden’ fees is through better transparency, not by blocking 401(k) participants from working with the advisor of their choice,” Graff explained. “If the administration moves forward with this proposed rule, American savers will be forced to pay out-of-pocket for their financial advice, or be limited to financial products with identical fees. Tens of millions of American savers who cannot afford to pay out-of-pocket will lose access to their financial advisor or be severely restricted in their choice of financial products. This is a wolf in sheep’s clothing. This so-called ‘conflict-of-interest’ rule is really the ‘No Advice’ rule.”
Graff continued, “No advice means less retirement security. People who have had a financial advisor for 4-6 years have 58% more assets than those who have not, so it is not surprising that 80% of people feel more secure about retirement because they have worked with an advisor of their choice. The ‘No Advice’ rule can be dressed up to look like a consumer-friendly proposal, but when you look beneath the feel-good rhetoric, what you find is a dangerous regulatory overreach that should be stopped before it does serious harm to the retirement security of millions of working — and retired — Americans.“
The exact contents of the latest iteration of the fiduciary rule have not yet been released. But the administration may have given us a suggestion regarding what they may contain in “The Effects of Conflicted Investment Advice on Retirement Savings,” a white paper released on Feb. 23, which echoes ‘s remarks to AARP. FiduciaryNews’ Christopher Carosa provides an insightful look at the paper here.
In remarks at AARP’s Washington, DC headquarters on Feb. 23, President Obama touted the fiduciary rules as building on other consumer-related initiatives his administration has taken and a way to help encourage and enhance retirement saving.
Obama acknowledged that not all advisors are unscrupulous. “On average, conflicts of interest in retirement advice results in annual losses of 1 percentage point for affected persons,” he said, adding later, “I want to emphasize once again, there are a whole lot of financial advisors out there who do put their clients’ interests first.” At the same time, however, he called it a “challenge” that “there are no uniform rules of the road that require retirement advisors to act in the best interests of their clients,” something he said is “hurting millions of working and middle-class families.”
In remarks concerning the proposed rule, Graff warned that “but all indications are that this rule will block Americans from working with the financial advisors and investment providers they trust simply because they offer different financial products — like annuities and mutual funds — with different fees. This rule could even restrict who can help you with your 401(k) rollover.
“The best way to address concerns about ‘hidden’ fees is through better transparency, not by blocking 401(k) participants from working with the advisor of their choice,” Graff explained. “If the administration moves forward with this proposed rule, American savers will be forced to pay out-of-pocket for their financial advice, or be limited to financial products with identical fees. Tens of millions of American savers who cannot afford to pay out-of-pocket will lose access to their financial advisor or be severely restricted in their choice of financial products. This is a wolf in sheep’s clothing. This so-called ‘conflict-of-interest’ rule is really the ‘No Advice’ rule.”
Graff continued, “No advice means less retirement security. People who have had a financial advisor for 4-6 years have 58% more assets than those who have not, so it is not surprising that 80% of people feel more secure about retirement because they have worked with an advisor of their choice. The ‘No Advice’ rule can be dressed up to look like a consumer-friendly proposal, but when you look beneath the feel-good rhetoric, what you find is a dangerous regulatory overreach that should be stopped before it does serious harm to the retirement security of millions of working — and retired — Americans.“
The exact contents of the latest iteration of the fiduciary rule have not yet been released. But the administration may have given us a suggestion regarding what they may contain in “The Effects of Conflicted Investment Advice on Retirement Savings,” a white paper released on Feb. 23, which echoes ‘s remarks to AARP. FiduciaryNews’ Christopher Carosa provides an insightful look at the paper here.
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