Today, executives from the nation’s largest financial services trade groups told the Department of Labor in the first of two days of hearings that its proposed fiduciary rule oversteps the authority given the agency by Congress, appears to ignore lawmakers’ expansion of Americans’ access to annuities and should be withdrawn.

The proposed fiduciary rule expands the definition of who is a fiduciary under the under the Employee Retirement Income Security Act, including for the first time advisors who make one-time rollover advice. At the same time, registered reps, independent insurance agents and even plan administrators will be blanketed by the standard to close loopholes in current regulations which allow some advisors to escape a best-interest standard, the DOL said.

“The Department should withdraw this proposal, which is overly broad, unnecessary, and inconsistent with existing federal regulations such as the SEC’s Regulation Best Interest. As a result, it could limit access to advice and education while also limiting investor choice in advisors,” Lisa Bleier, Head of Wealth Management, Retirement and State Government Relations at the Securities Industry and Financial Marketing Association (Sifma) testified.

Bleier said the proposal will blanket all advisor conversations, even those that are merely educational or responsive to requests for plan proposals and other inquiries.

She also said the changes will make it “challenging” even to provide consumer education in the rollover area.

Evershed Sutherland Partner Mark Smith, who testified for Financial Services Institute (FSI) at the DOL’s first day of hearings on the proposal, called President Joe Biden’s reference to annuities sales fees as “junk fees” a “lazy sound bite of one news cycle.”

The proposed rule “will only serve to drive up costs, add complexity and result in fewer Americans being able to afford” retirement advice and products, Smith said.

FSI CEO Dale Brown said in a statement before the hearing that “it is clear the DOL's proposed rule exceeds the Department's statutory authority, conflicts with the 5th Circuit decision vacating the 2016 fiduciary rule and imposes unnecessary costs that will result in Americans losing access to the advice, products and services they need to achieve a dignified retirement.

American Council of Life Insurers (ACLI) President and CEO Susan Neely said the proposed rule “Ignores the robust regulatory system implemented by the states and SEC” as well as the 5th Circuit Court of Appeals, which overturned the DOL’s Obama-era fiduciary rule on the grounds that it the agency exceeded its authority.

A number of attorneys believe that the agency will face the same legal hurdles that derailed the 2016 rule.

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