Not all the responses were so upbeat. In comments released on Tuesday, the Financial Planning Coalition, consisting of the Financial Planning Association (FPA), the Certified Financial Planner Board of Standards (CFP Board) and the National Association of Personal Financial Advisors (NAPFA) expressed doubt that the proposal was anything but a watering down of previous attempts at fiduciary rulemaking.
“Unlike the past when Defined Benefit plans assured financial independence in retirement, Defined Contribution plans offer no such assurance and place the burden of investment decision-making squarely on the shoulders of American workers and Main Street investors. We believe financial advisers who provide advice to consumers on their ERISA-qualified plans must act in a fiduciary capacity at all times.
“The Financial Planning Coalition will review the ‘Investment Advice Rule,’ engage a range of stakeholders to assess the efficacy of the Rule and provide comments on the proposal to DOL prior to the conclusion of the 30-day comment period. The Coalition intends to focus on the extent to which DOL’s Investment Advice Rule would provide additional protections for retirement savers under ERISA beyond those under the Securities and Exchange Commission’s (SEC) new Regulation Best Interest which goes into effect today.
“In our public comment letters to the SEC concerning Regulation Best Interest, the Coalition strongly encouraged the SEC to use as a template CFP Board’s revised Standards that extend the fiduciary obligation of a CERTIFIED FINANCIAL PLANNER™ professional to all financial advice. We hope that the DOL proposal does not merely mirror language from Regulation Best Interest, but instead proposes strengthened safeguards under ERISA that are consistent with the robust fiduciary standard contained in CFP Board’s revised Standards.”
The Financial Services Institute (FSI), which was critical of the DOL’s initial fiduciary rule, sounded hesitant but positive about the new exemption.
“We are thoroughly reviewing the rule proposal. However, we expect the Department heeded the concerns outlined by the Fifth Circuit Court of Appeals and consulted with the SEC to avoid conflicts with Regulation Best Interest (Reg BI),” said FSI President & CEO Dale Brown in released comment. “These regulations must work in tandem to prevent conflicting requirements for financial advisors working to diligently comply with the rules and to avoid creating confusion among investors. This will also ensure Main Street Americans have access to the quality, affordable financial advice they need to achieve their financial goals.”
Jasmin Sethi, associate director of policy research at investment research firm Morningstar, applauded a more comprehensive impartial conduct rule for the industry, but also expressed concern that it doesn’t do enough to protect investors.
“We are still digesting the proposed rule and its implications. We are supportive of the DOL applying impartial conduct and other standards to investment advice fiduciaries advising on rollovers,” said Sethi in comments released on Tuesday. “We are still assessing the implications of the fact that the five-part test does not apply to advice on a single rollover transaction. We are also considering the implications of the DOL’s view on product costs, the lack of a private action, and the lack of discussion around collaboration with the SEC on future enforcement.
“Thus, while at first blush the proposed rule appears to be protective of investors, we are concerned that it may not go far enough. We plan to examine the proposed rule in greater detail and submit our analysis in a comment letter.”
The new proposal comes just after the XY Planning Network failed in an attempt to block the SEC’s new regulation, which many fiduciary advocates view as a watered-down version of the DOL’s original fiduciary rulemaking.
The prior DOL fiduciary rule was struck down by the Fifth Circuit Court of Appeals in 2018, a decision which temporarily re-established the five-part test to determine fiduciary status. The new rule brings the DOL's proposal in line with the Fifth Circuit's decsion.
Labor Secretary Eugene Scalia was the lead plaintiffs’ counsel in the lawsuit that overturned the DOL’s previous fiduciary rulemaking.
“Today’s proposed exemption would give Americans more choices for investment advice arrangements, while protecting the retirement savings of American workers. The exemption would add to the tools individuals need to make the right decisions for their financial future,” Scalia said in comments released on Monday.
The public will have 30 days to comment on the new rule. The DOL’s proposal is available here.