BD, Insurer Groups Blast Fiduciary Plan at DOL Hearing

Industry trade groups told the Labor Department Tuesday during the first day of a two-day online hearing to withdraw its new fiduciary proposal, the Retirement Security Rule: Definition of an Investment Advice Fiduciary.

The Securities Industry and Financial Markets Association, which represents broker-dealers, investment banks and asset managers, and the American Council of Life Insurers were among 45 groups, some supporting the proposal and some opposing it, that requested to testify at the hearing.

Lisa Bleier, associate general counsel for the Securities Industry and Financial Markets Association, told Labor officials in her testimony that the rule “is overly broad, unnecessary, and inconsistent with existing federal regulations such as the SEC’s Regulation Best Interest.”

As a result, Bleier said, “it could limit access to advice and education while also limiting investor choice in advisors.”

Said Bleier: “There are so many more areas of retirement law that deserve our attention, including helping more individuals save for retirement and for emergencies, increasing exposure to financial literacy programs, and helping individuals make their savings last through retirement. Let’s find better uses for our collective time.”

In her opening remarks at the hearing, Lisa Gomez, assistant secretary of Labor for the Employee Benefits Security Administration, said the “chief aim” of Labor’s new rule was “to make sure that when individual retirement investors turn to investment professionals for sound advice rooted in their best interest, they get just that — advice that is prudent, loyal, candid and free from overcharges.”

Labor’s planned rule “defining investment advice fiduciary are unnecessary” due to the SEC’s Reg BI, the National Association of Insurance Commissioners’ best-interest model and the department’s own Prohibted Transaction Exemption 2020-02, according to Bleier.

SIFMA members “made substantial changes in 2019 and 2020” to implement Regulation Best Interest, and some firms “instituted further changes to their practices to comply with PTE 2020-02,” Bleier continued.

“Flexibility in practices and firm arrangements provide individual investors with substantial choice in the marketplace, while still getting the benefit of financial professionals looking out for their best interest,” Bleier stated. “In fact, senior Department officials have acknowledged the validity of Reg BI as a strong standard.”

Nonetheless, Labor “has chosen to draft a regulation so broad as to make all conversations between a financial professional and an investor into ERISA fiduciary conversations,” Bleier maintained.