The chief executive officer of the Financial Planning Association told the Department of Labor today that 60 days is not enough time for advisors to comply with the department’s proposed fiduciary rule.
Patrick Mahoney, the Denver-based association’s CEO, made the comments during the second day of a two-day online hearing held by DOL officials.
The proposed rule would layer fiduciary standards on advisors—and, for the first time, insurance agents—offering retirement plan and IRA rollover advice to investors. Critics said this would create burdens for many advisors.
Many FPA members are dually registered as both broker/reps with the Financial Industry Regulatory Authority and as SEC-registered investment advisors, and they carry multiple licenses to meet their clients’ needs. As a result, they would “require significantly more time to review and fully understand any final rule proposal, which must be considered in light of all other existing regulatory obligations at play in our industry,” Mahoney said in the hearing.
(The text of the proposed “Retirement Security Rule” can be found here.)
The proposal also gives advisors only two months to implement changes, which Mahoney said “is simply not enough time for those who might, for example, need to review and rewrite policies and procedures or update their disclosure documents and client agreements—especially if they are small businesses or single-planner operators who lack in-house counsel and have significantly fewer resources to help them understand new requirements and come into compliance.”
He urged the DOL to consider an extension of the 60-day effective date and requested a commitment from the agency to implement any final proposal using a phase-in approach that stresses advisor education rather than “punitive” enforcement.
“For the regulated community to be successful in complying with any new requirements and changes to their regulatory obligations, there must first be clarity and mutual industry-wide understanding of the proposal—as well as sufficient time to implement any necessary changes,” Mahoney said.
He also asked the department to provide more details and clarity about how compliance with existing fiduciary standards and best interest obligations already in place under other agencies’ regulatory schemes will or will not ensure that advisors are acting within the bounds of the DOL’s fiduciary rule.
“While the department mentions many times its effort to harmonize the proposed rule with existing industry regulations, it remains unclear how these competing frameworks will interact in practice,” Mahoney said.
Before considering enforcement of any final rule, the agency should provide “clear implementation guidance and compliance tools, such as a succinct list of new documentation requirements, turnkey forms and templates, as well as FAQs ahead of, or along with, any final rule,” he said.
At a minimum, this guidance should identify where compliance with existing regulatory requirements will satisfy the department’s proposed requirements and where advisors will need to take steps beyond compliance with their existing regulatory obligations, Mahoney added.
That means the DOL should work closely with the SEC, the National Association of Insurance Commissioners and other relevant agencies “who are best-suited to provide effective, clear standards for consumer protection while avoiding excessive compliance burdens,” he said.
Mahoney said the FPA, like much of the brokerage and insurance industry, worries about how the compliance costs of the proposal may affect consumers’ access to advice. “What is missing from the proposal’s current time line is adequate time to determine if such concerns remain valid.”
Both the DOL and the industry “would benefit from re-examining the impact analyses that pre-dated the new best interest standards we now have in force as we sit here today,” Mahoney said.
He did, however, stress that he supports the proposed rule’s language to require that any professional who uses the “advisor” moniker with clients act as a fiduciary advisor.