The National Association of Personal Financial Advisors (NAPFA) “commended” the Department of Labor’s final retirement security rule, which the trade group said was needed to update and strengthen the fiduciary standard of care “for millions of hard-working Americans with retirement plans.”
The rule, which goes into effect September 23, extends the fiduciary standard to a number of professionals who provide advice on retirement saving strategies. Almost all professionals will now will be legally obligated to provide advice in the client's best interest, the trade group of 4,600 fee-only advisors said in a statement yesterday.
“The U.S. Department of Labor’s Retirement Security Rule is a win for retirement savers across America,” said Daphne Jordan, chair of NAPFA’s board of directors. “It is an essential and long-overdue reform that will improve retirement security and give retirement savers peace of mind that their interests—and their hard-earned savings—are put first.”
Without the rule it is “virtually impossible” for American investors or retirement savers to distinguish a salesperson or a commission-based advisor from a fiduciary financial advisor, who is legally obligated to provide advice in the client's best interest, the association said.
“For more than 40 years, NAPFA has advocated for a robust fiduciary standard to apply to all financial advice because we believe consumers are best served working with a fiduciary financial advisor who is Fee-Only and legally obligated to provide advice and strategies in the client's best interest,” said NAPFA CEO Kathryn Dattomo.
“We commend the U.S. Department of Labor for issuing this common-sense policy that brings ERISA’s protections in line with today’s retirement landscape and, most importantly, protects retirement savers’ hard-earned nest eggs,” Dattomo said in a statement.
NAPFA’s comments echo those of the CFP Board, which applauded the final rule. “The DOL’s final rule addresses regulatory gaps and helps protect Americans from the costly effects of conflicts of interest by requiring financial professionals to provide retirement investment advice in their clients’ best interest,” the certifying body said in a statement.
The CFP Board, which has its own fiduciary standards, also testified in Congress that the rule is needed to close “regulatory gaps and help protect Americans” from conflicts of interest.
Meanwhile, the Financial Planning Association (FPA) has expressed concerns about the DOL rule potentially raising compliance costs for its 28,400 members, which the group said would increase the cost of advice and reducing access to advice for some—an argument that echoes criticisms made by financial industry opponents of the DOL proposal.
“The proposed rule makes a number of changes to the current regulatory framework that will require significantly more time for meaningful analysis and comment, and to understand how this proposal would impact financial planners and retirement savers, alike,” FPA CEO Patrick Mahoney wrote in an earlier comment letter.