Wall Street’s biggest trade group is blasting the Department of Labor for “haphazardly” favoring newly developed products as solutions for the pending fiduciary rule.
In a comment letter dated Wednesday, the Securities Industry and Financial Markets Association took the DOL to task for requiring the industry to “haphazardly, and on very short notice, chase the newest ‘Department-favored’ product, which might not have been tested yet, or had possible challenges worked out.”
In its latest request for comment, the DOL “suggests that fee-based annuities and clean [mutual fund] shares are the answer,” SIFMA said. “There is no evidence, however, that fee-based annuities or clean shares are what retirement savers want.”
“Financial institutions and their consultants have spent significant amounts struggling to create the record-keeping systems that clean shares would require, and it is unclear whether those shares will be acceptable to investors, who are not used to seeing the transaction’s costs in their account,” SIFMA said.
The trade group also provided an updated analysis from its own consultant, Deloitte, which confirmed an earlier estimate of $4.7 billion in start-up costs relating to the rule.
Deloitte’s analysis of 21 SIFMA member firms found that as of August 9, 53 percent of them reported limiting or eliminating access to advised brokerage accounts for retirement investors. Nearly half (47 percent) have maintained access to brokerage accounts, while 24 percent eliminated that option.
Nearly all (95 percent) of the firms reduced access to certain products. Mutual funds, annuities, structured products, fixed income and private offerings were some of the securities affected.
“Almost all study participants indicated that litigation risk has been a primary concern,” Deloitte said in its report. Brokerage firms said they could not quantify the “perpetual” risk of class-action suits, which meant they would take conservative approaches to compliance that eliminated or limited services or products.
The 21 responding firms were invited by SIFMA and chose to participate. The firms in total have 132,000 financial advisors, and 35 million retail retirement accounts holding approximately $4.6 trillion in assets.
Separately on Wednesday, the DOL said in a court filing that it was seeking a delay in the rule’s implementation—to April 2019.