The Insured Retirement Institute (IRI) says research shows that there will be little political upside for the Biden administration to resurrect the U.S. Department of Labor’s fiduciary rule because it could hurt middle-class, Black and Latino investors.
Research from both Deloitte and the Hispanic Leadership Fund that shows that the rule will hurt households earning $100,000 or less and people of color disproportionately, Paul Richman, chief government and political affairs officer at IRI, told attendees at the Next Chapter 2022: Rockin’ Retirement virtual conference this week. Next Chapter is a joint venture produced by Financial Advisor, the Execution Project and the Money Management Institute.
“We have some new research that shows that if this rule is reinstated in a similar format as to what it was in 2016, it’s going to hurt the very people it was intended to help and once again prevent those hard-working workers and retirees all across the country from receiving information that’s relevant to their financial well-being,” Richman said.
The Hispanic Leadership Fund (HLF) research shows that accumulated retirement savings of about 2.7 million individuals with incomes that are below $100,000 would be reduced by about $140 billion over 10 years if a new DOL fiduciary rule reduces the products, services and professionals who swerve the middle-class, Richman said.
“Even more significant is the disproportionate impact that it would have on people of color, Latinos and Black populations, who would face about a 20% increase in the wealth gap they experience. We’re out there talking to folks on the Hill about this to raise awareness of what the potential rulemaking at DOL could do,” he said.
According to the research, some $900 billion in savings in about 10.2 million retirement accounts, many of them modest, had their access to brokerage advice either limited or eliminate by the 2016 DOL fiduciary rule before it was struck down in a 2018 court decision. Those findings are from the Deloitte study
The 2016 rule greatly expanded those who would be considered a fiduciary to an ERISA plan or IRA if they received a fee or other compensation for investment advice. Brokerage and insurance professionals had a hard time meeting the fiduciary standard, which required them to eliminate most conflicts of interest.
“I can’t imagine the Biden administration is going to push something like this through prior to mid-terms. This is something that actually causes you to lose votes,” said Jeff Strunk, managing partner at Forbes Tate, a Washington, D.C.-based lobbying firm.
“The way I view this from a political standpoint is that talking about this rule it is not going to change the narrative in a positive way for the mid-terms. Given the IRI statistics, you are actually minimizing the success of those who have been using neighborhood financial professionals for a long time,” Strunk said.
Kelley Williams, senior vice president at Forbes Tate Partners, said IRI has also been actively engaged in reaching out to the Congressional Black Caucus, Hispanic Caucus and Asian-Pacific Caucus. “Reinforcing these messages with these caucuses is a really smart strategy and to Jeff’s point, lifting that up and having members of Congress have conversations with the administration and say ‘This would not be wise,’” has significant impact,” he said.