The Department of Labor’s proposed fiduciary rule is meant to align the best interests of the customer with the goals of the advisor and his or her brokerage, Phyllis Borzi, assistant secretary of the Employee Benefits Security Administration of the DoL, said this morning during the first of a series of public hearings being held this week on the rule. But while some industry stakeholders testified the rule’s requirements are feasible, many advisors and industry groups said they are impractical and the rule all but eliminates advisor interests.

See also: Fiduciary advocates, critics clash as DoL hearings kick off

The DoL in April released its proposal to amend the regulation governing ERISA’s fiduciary definition. The proposed fiduciary rule aims to expand fiduciary duties to those who provide investment advice.

The DoL this week will hear testimony from advisors, trade groups, legal experts and other industry representatives about the possible effects of the proposed rule and possible revisions that could be made. In the process, the DoL will also reopen the record for public comments. The record will remain open for about two weeks following the publication of the transcript of the hearings, according to Timothy Hauser, a deputy assistant secretary at the DoL.

See also: Fiduciary ‘ambiguity’ is primary concern for advisors

In one of this morning’s sessions, Nick Lane, head of U.S. life and retirement for AXA and chairman of the Board of Directors for the Insured Retirement Institute, said the proposed rule needs “additional modifications to make it workable.”

“Although the preamble to the proposal clearly indicates that, under the ‘Best Interest’ standard, the adviser must put the client’s interests first, ahead of their own, the actual wording of the standard … seems to suggest that the advisor, as well as any affiliates, can have no interest at all.”

“We support the DoL’s objective of better serving clients and providing better client outcomes. We passionately believe Americans deserve dignity in retirement, financial protection for their families and an empowerment for financial literacy. Advisors should work in the best interest of their clients,” he said. “But we have justifiable concerns that there will be significant and negative unintended consequences.”

IRI’s President and CEO Cathy Weatherford, in written comments to the DoL, said some of the consequences could include limiting consumers’ access to annuity products “at a time when we should be encouraging and promoting lifetime income strategies as a source of retirement income that cannot be outlived.”

Advisor groups have called the proposed rule ‘burdensome’ and argued the additional requirements, such as increased disclosures, would make it harder for financial professionals to provide investors with affordable services and products.


Barbara Roper, director of Investor Protection for the Consumer Federation of America, however, called many of the industry’s loud objections to the rule, “a last gasp effort.”

The threat that adoption of the DoL rule would lead to a mass exodus of advisors from this space and make valuable advice harder for consumers to access has no merit, she said.

“There are many arguments as to why this doesn’t hold up,” she said. “There’s no evidence that fee-based accounts are more expensive and this is what [financial advisors] always say when faced with a ruling they don’t like.”

While there are very good reasons to streamline the rule, she said, “There is no reason to believe that the industry is going to voluntarily walk away from a multi-trillion dollar market if you close on this rule.”


Borzi said the DoL has received a plethora of comments about how to implement the fiduciary standard.  Commentators, she said, have offered suggestions on how to reduce the implementation challenges, ease the transitional challenges by adjusting the timelines and reconsidering the scope of grandfathered advice, clarifying the definitions, adjust or expand the assets covered by exceptions, and more.

In his testimony, Lane said IRI suggests three solutions to make the proposed rule more workable, including:

1)      Broadening the definition of what is considered education and what is considered advice. “The DoL’s definition should not include customary sales, marketing, educational and service-related activities,” he said.

2)      Equitably including variable annuities in PTE 84-24. The importance of individual annuity options for lifetime guarantees given the steady decline of company-supported defined benefit plans, is indisputable.

3)      Streamline the best interest contract exemption and work toward harmonization. “Feedback from our members, advisors and our IT staff is that in its current form it is unworkable and that in its current form it will be confusing for consumers and advisor who will have to operate under four different sets of rules.” 

Borzi said commentators have also suggested the DoL should reiterate that the rule does not extend to advice such as that for health and disability plans.

“We believe this is clear, but if there is any doubt we can work to remove any ambiguity,” she suggested. “With your help we will publish a final rule that is both protective and reasonable.”

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