Americans’ retirement savings could become stagnant or worse unless both the U.S. Department of Labor (DOL) and the Securities and Exchange Commission offer strong fiduciary rules giving investors greater protections when hiring a financial advisor.
That’s the strongly worded message delivered today to the Trump White House by the Financial Planning Coalition—an advocacy group made up of the Certified Financial Planner Board of Standards, the Financial Planning Association and the National Association of Personal Financial Advisors (NAPFA).
“While the coalition is pleased that the [SEC] is pursuing a fiduciary standard for all investment advice, it is important that any rule proposed by the SEC not replace but complement the DOL rule,” the group said.
President Trump lauded the growth of Americans’ 401(k)s and pensions during his first State of the Union address. “But while many Americans’ retirement savings continue to thrive, it is imperative that these financial gains are preserved for the long term,” the coalition said in a statement. The statement was released on the one-year anniversary of Trump’s presidential memorandum ordering a review of the DOL’s fiduciary rule.
“The American people deserve to get a good deal when they seek advice for retirement savings,” the coalition statement said. “The coalition calls on the president and his regulatory agencies to prioritize full implementation of a fiduciary standard of care to prevent conflicted financial advice and protect Americans’ hard-earned savings.”
New rules would require advisors and, for the first time, registered reps to put clients “best interests” above their own. The delays mean that there is a dearth of protections for investors—many of whom have experienced a significant growth in their retirement accounts in the past year and need financial advice.
“One year ago, the president submitted a presidential memorandum to the Labor secretary to review its fiduciary rule. Since then, the DOL has delayed the full implementation of the rule—which already addresses concerns raised by lawmakers, regulators, financial industry organizations, public interest groups and consumers—and unnecessarily jeopardizes the financial well-being of millions of Americans, who lose billions of dollars each year because of conflicts of interest. Continued delay of this important measure denies millions of people the retirement security that they deserve,” the coalition said.
The DOL has extended the review of the conflicts of interest and disclosure sections of its rule—which applies only to qualified retirement assets—until July 2019. The DOL rules go beyond disclosure and actually set a higher bar than current SEC rules do for advisors wanting to sell certain products such as variable annuities.
As wirehouse and bank brokers move headlong into the fee-based advice business, they are operating without consumer protection standards that require them to put investors’ best interests first. The SEC has been debating an expanded fiduciary rule that would apply to brokers (advisors already have a legal fiduciary standard) for more than a decade. The agency says now it plans to propose a rule by the second quarter of this year.
But lockstep fiduciary rules from both agencies are the best protection for investors, the group said.