Independent broker-dealer leaders suddenly find themselves playing defense on a key issue: the Department of Labor’s pending fiduciary rule that would impact financial advisors who handle retirement plans and IRAs.

B-D execs and officials at the Financial Services Institute were taken aback by the leaked memo from the chairman of president Obama’s Council of Economic Advisers signaling that the White House may support the DOL’s aggressive efforts to tighten oversight of retirement accounts.

The memo claims costly investments and excessive trading can cost investors $8 billion to $17 billion a year, according to Bloomberg News.

It also gives significant political support to the DOL and indicates White House backing for the controversial rulemaking, which the department is due to re-propose with changes intended to mollify industry critics.

The proposal would impose a fiduciary duty on brokers who advise on retirement accounts.

Industry interests had hoped the DOL would back off, and coordinate with the SEC in any fiduciary rulemaking.

The memo “wasn’t encouraging,” said Dave Bellaire, FSI general counsel at a meeting with reporters Tuesday at the group’s annual meeting in San Antonio, Texas.

“It gave a slanted view of our industry,” Bellaire said, implying that advisors were “preying on their clients.”

FSI chief executive Dale Brown said he was disappointed in the memo, especially after FSI representatives met with the white house economic council in mid-November.

“We had a very constructive dialogue,” Brown said. “We felt we had an opportunity to bring a perspective they hadn’t heard before” about the role of independent advisors.

Brown said the DOL would have to propose its updated rule within a few months to finish the rulemaking during Obama’s term.

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