The DOL fiduciary rule has not gone into effect yet, but the U.S. Chamber of Commerce says there is already proof it is going to hurt small investors and the financial industry.
The Department of Labor, in ordering the rule to be implemented June 9, is overstepping its jurisdiction and its expertise, says the Chamber of Commerce in its report, The Data Is In: The DOL Fiduciary Rule Will Harm Small Retirement Savers.
The chamber calls the rule “a sweeping expansion of government authority that fundamentally disrupts the way in which Americans save for retirement.” It has filed suit against the DOL over the rule and is seeking broad changes.
“Throughout the rule-making process, the U.S. Chamber warned that the fiduciary rule was built upon a mountain of flawed data and analysis, and would harm the very people it was purported to protect by raising costs and limiting investment options,” the chamber says.
Other organizations, such as the Financial Planning Coalition and the Consumer Federation of America, have given their wholehearted support to the fiduciary rule.
The coalition, made up of the Certified Financial Planner Board of Standards Inc., the Financial Planning Association and the National Association of Personal Financial Advisors, said the DOL rule is a first step to ensure that retirement savers have an enforceable standard that will require advisors to put their customers’ financial interests ahead of their own.
The Consumer Federation added that consumers expect and deserve the high standards that will be set by the fiduciary rule.
And betting against the rule has backfired for small independent broker-dealers.
For its report, the chamber compiled information from reports and comment letters from a variety of industry and consumer organizations that have been submitted to the DOL since February, when the implementation of the rule was pushed back to June 9. Labor Secretary Alexander Acosta said May 22 there was no reason to delay the rule further. The rule requires broker-dealers and dually registered advisors who handle retirement accounts to act in the best interests of clients, rather than adhering to a lesser “suitability” standard. Acosta has said the department will continue to review the rule in the coming months.
According to the reports compiled by the chamber, up to 7 million individual retirement account owners could lose access to investment advice as firms pull back from servicing small accounts because they feel forced to charge flat fees rather than commissions.