Labor Secretary Tom Perez told Congress on Tuesday he’s encouraged by substantial and growing areas of agreement on the proposed fiduciary rule for retirement plan advisors between the agency and the financial services industry.
“There’s an acknowledgement and acceptance among our stakeholders in the financial services sector that there are significant conflict of interest problems in the marketplace serving retirement investors,” Perez said hours before the public comment period was officially closed on the proposal.
He added agreement is also increasing on the issues of having an enforceable best interest standard, a need for concrete steps to address fees and other revenue incentives that could taint investment recommendations and providing more effective disclosures to investors
“I don’t want an advisor looking at a client and thinking you are the only thing standing between me and a trip to Hawaii (because of a sales incentive),” Perez said.
However, Senate pensions subcommittee chairman Sen. Johnny Isakson (R-Ga.) said some disclosures mandated by the rule would be impossible to provide and, as a whole, the disclosures are too burdensome for advisors.
The requirement for fee disclosures could create problems because fees change too frequently, he added.
“Because fees often fluctuate, as do rates and return, such estimates are inevitably wrong. For that reason, they are considered misleading and actually banned by the Securities and Exchange Commission,” Isakson said.
The lead Democrat on the subcommittee, Sen. Al Franken of Minnesota, called the fiduciary rule “great.”
In further justifying the rule, Perez said there is nothing stopping advisors from getting backdoor payments at their client’s expense.
He called the rule flexible and not a straightjacket for pension plan professionals.