Senate Dems Suggest Improvements to Fiduciary Proposal

By Nevin Adams • August 10, 2015 • 0 Comments
The public comment period may have closed, but a group of U.S. Senators has weighed in on the proposed fiduciary regs — and lent their support to a recommendation of the American Retirement Association.

The letter, signed by Senate Finance Committee ranking member Ron Wyden (Ore.), as well as fellow Democrats on the committee, namely Ben Cardin (Md.), Bob Casey (Pa.), Tom Carper (Del.), Debbie Stabenow (Mich.), Michael Bennet (Colo.), Mark Warner (Va.) and Robert Menendez (N.J.), applauds the Labor Department’s efforts in revising the fiduciary rule, but quickly moves to outline a number of “thoughtful concerns from stakeholders,” noting that the Senators believe the guidance can be “improved and enhanced.”

Echoing a concern — and a solution — previously articulated by the ARA, the letter highlights the issue of a plan adviser who receives level compensation for working with a retirement plan, and who would receive level compensation for investment advice provided to an IRA rollover from a retirement plan, but at a higher level (due to the higher level of service with the IRA), and who would be subjected to the “same difficult BIC exemption requirements faced by variable fee advisers.” The Senators ask that the situation be addressed “in a way that provides a level playing field for all advisers.”

Additionally, the letter specifically asks that any guidance:

  • Not restrict access by small businesses to advisers who promote access to retirement plans (acknowledging that “retirement plans for small businesses are sold, not bought.
  • Not limit advisers from assisting plan participants and investors with rollover or investment education.
  • Take into account existing state regulations, the risk attributes of the products to be purchased and the risk attributes of the industries potentially subject to the proposal.
In support of those goals, the letter asks that the final guidance on the rule clarify:

  • The application of the best interest contract exemption (BIC) apply to both distributions and rollover advice.
  • That there is no requirement of a signed, written contract prior to sitting down for the first time with a potential client to discuss their services.
  • The definition of assets under the BIC exemption, specifically to include the addition of listed options.
The letter expresses specific concerns with the ability to demonstrate that compensation is reasonable without guidelines and safe harbors, that the disclosure requirements “seem excessive”, and that the current disclosure requirements “will overwhelm participants and investors.”

The Senators also called on the Labor Department to:

  • Provide “flexibility” in the naming of specific fund choices without transforming investment education into fiduciary advice.
  • Critically examine the BIC exemption to ensure that it is operational.
  • Scrutinize your guidance to make sure that it does not disfavor lifetime income options over other investment options,” noting that just because a product is ‘low-fee’ does not mean it is always the best investment for a particular investor.
  • Consider further transition issues including possible protection of advice provided or paid for before the applicability date, but not acted on until afterwards.
  • Ensure that the ability to make referrals to advisory programs is maintained and “access to constructive online tools is not restricted.
A group of Republican members of the House of Representatives wrote a letter to Labor Secretary Perez urging him to withdraw the fiduciary rule on July 21.