Financial Planning Coalition Tells Congress: Do Not Stop DOL Fiduciary Rulemaking

Coalition Testified in Strong Support of Fiduciary Rule

The Financial Planning Coalition – comprising Certified Financial Planner Board of Standards, Inc. (CFP Board), the Financial Planning Association® (FPA®) and the National Association of Personal Financial Advisors (NAPFA) – today called on Congress to refrain from any legislation – including a stand-alone measure or a provision in a must-pass omnibus spending bill – that would block the Department of Labor (DOL) from promulgating a final rule to require fiduciary-level advice for all Americans’ retirement assets under the Employee Retirement Income Security Act (ERISA).

Testifying before the Subcommittee on Health, Employment, Labor, & Pensions on the Coalition’s behalf, Marilyn Mohrman-Gillis, CFP Board’s Managing Director of Public Policy and Communications, urged Congressional leaders to allow the DOL’s rulemaking to proceed, arguing that the agency has engaged in a comprehensive, deliberative and transparent process.

“The Coalition urges Members to reject any legislative proposal related to the DOL rulemaking – whether standalone legislation or appropriations ‘riders’ on an omnibus funding bill. Such legislation is unnecessary and would delay or derail a final rule to legally obligate Advisers to serve their clients’ best interests,” Mohrman-Gillis testified. “Any legislative effort directing the outcome of this open, transparent, and fully participatory administrative process – before the DOL has an opportunity to consider and to incorporate public input into a final rule – is unnecessary and premature.”

The Coalition repeated earlier opposition to any bill or legislative mechanism to delay the final rule. In particular, Mohrman-Gillis said that legislation based on the ‘declaration of principles’ proposed by Representatives Neal (D-MA) and Roskam (R-IL) is unnecessary and would weaken, not strengthen, the fiduciary standard under ERISA.

“A final rule, promulgated by DOL, the expert agency required to enforce ERISA, and fully informed through its rulemaking process, is the best solution to actually ensure that Advisers are required to serve Retirement Investors’ best interests,” Mohrman-Gillis said.

Mohrman-Gillis also shared the Coalition’s unique perspective, based on the experience of CFP® professionals and FPA and NAPFA members who are already committed to providing financial planning services under a fiduciary standard. She emphasized the urgent need for and workability of the DOL’s rule to amend ERISA’s outdated, 40 year-old definition of fiduciary. “We believe that a strengthened fiduciary rule under ERISA is essential for America’s Retirement Investors and is workable for Advisers, and we strongly support adoption of the DOL’s re-proposed rule.”

Mohrman-Gillis’ written testimony can be found here.

In keeping with the Coalition’s efforts to advocate for policy measures that ensure financial planning services are delivered in the best interests of the public, Mohrman-Gillis outlined why the rule secures critical consumer protections without reducing access to advice.

“Reliable empirical data from numerous studies conducted by and cited by the Coalition demonstrate that a fiduciary duty will not force Advisers to abandon middle-income households and will not leave them without investment advice,” Mohrman-Gillis said.

The assertion from fiduciary critics that advisers will stop serving middle-income savers is based on a faulty industry study that assumed commissions would be banned under the DOL rule. In fact, the rule specifically permits advisers to receive commissions for the sale of securities and insurance products, she noted.

Mohrman-Gillis added, “The Coalition’s own experience also belies the notion that Advisers, required to act in the best interest of the client, will be unable to serve middle-income clients. Today, there are thousands of CFP® professionals and FPA and NAPFA members across the country who provide fiduciary-level services to everyday Americans either under commission-based business models or for fees with no or very low minimum asset requirements.”

The Coalition outlined its full support in a 35-page comment letter submitted to the DOL on July 21, 2015.

 

Financial Planning Coalition to Congress: Oppose Any Attempt to Delay DOL Fiduciary Rule

The Financial Planning Coalition sent letters to all members of the House of Representatives and all members of the Senate on November 16, urging opposition to any bill or legislative mechanism to delay the final Department of Labor (DOL) fiduciary rule:

“We urge you to reject any legislative proposal related to the DOL rulemaking – whether standalone legislation or appropriations “riders” on the omnibus funding bill – including any legislation based on a “declaration of principles” that are currently circulating in Congress. Congressional action is unnecessary and would derail, not advance, a final rule to require retirement advisors to serve their clients’ best interests.”

“Legislation based on the “declaration of principles” as proposed would weaken, not strengthen the fiduciary standard under ERISA. These principles refer only to disclosure of conflicts of interest; but are completely silent on a fundamental component of the fiduciary standard – an obligation to mitigate compensation practices and incentives that give rise to conflicts of interest. A final DOL fiduciary rule is the correct solution to ensure that advisors are truly required to serve their clients’ best interests. We urge you to reject this or any other legislative proposal – whether stand alone or in the funding bill – that will serve to delay or defeat the promulgation of a final DOL fiduciary rule.”

Coalition to Congress: Let DOL Promulgate a Final Rule to Protect Retirement Investors

The Financial Planning Coalition issued the following statement regarding the House Financial Services Committee’s vote in support of H.R. 1090, legislation designed to impede the Department of Labor’s fiduciary rulemaking:

“The need for a strengthened fiduciary rule under the Employee Retirement Income Security Act (ERISA) is long overdue. As H.R. 1090 heads to the House floor, we urge Congress not to intervene – through this bill or any other vehicle – and to let the DOL do its job and protect retirement investors.

“As recognized by 25 members of the House Financial Services Committee, the DOL is the expert agency charged with implementing fiduciary-level advice for tax-preferred retirement assets under ERISA. That fiduciary principle – wisely recognized by Congress in 1974 – is even more important in today’s retirement marketplace in which retirement investors are largely responsible for their own retirement savings.”

The Coalition sent a letter to members of the House Financial Services Committee on September 29, urging opposition to the legislation. H.R. 1090, the so-called “Retail Investor Protection Act,” does not protect retail investors. Rather, it inappropriately prohibits the DOL from adopting a rule to protect America’s retirement investors until after the Securities and Exchange Commission (SEC) issues a fiduciary rule. This would indefinitely delay or completely block adoption of a DOL fiduciary rule because the SEC is not required to issue a fiduciary rule, has yet to propose a rule – almost five years since Congress authorized it to do so – and may never do so. In contrast, the DOL, after years of study and an extensive economic analysis, has released a comprehensive proposal that would close loopholes in its 40 year-old rule and extend long overdue fiduciary advice to plans, plan beneficiaries, and IRA holders under ERISA.

Financial Planning Coalition: Alternative Fiduciary Proposals Fail to Meet Basic Requirements of Best Interest Standard

The Financial Planning Coalition issued the following statement after filing a supplemental comment letter supporting the Department of Labor’s (DOL) re-proposed fiduciary rule:

“The DOL’s re-proposed fiduciary rule is a long overdue and much-needed update to the 40 year-old definition of ‘fiduciary’ under the Employee Retirement Income Security Act (ERISA). Americans deserve a secure retirement, and the re-proposed rule, with suggested modifications, ensures that the retirement savings advice they receive is in their best interest.

“Proposals from financial services organizations and firms, described as alternative approaches to a best interest standard, would actually dilute the DOL’s efforts to put in place critical protections for retirement investors. All of the alternative proposals fail to meet the basic requirements of a true fiduciary standard under either ERISA or securities law, and fall significantly short of the DOL’s policy goals to more closely align the incentives of firms and advisers with the interests of our nation’s retirement investors.

“While some continue to argue that the rule is unworkable, the Coalition and its stakeholders offer their experience with the fiduciary standard to demonstrate the contrary. Regardless of business or compensation model, the Coalition’s 80,000 financial planners provide financial planning services under a fiduciary standard, successfully contributing to their firms and practices while providing needed benefits and protections for retirement investors.”

Financial Planning Coalition to Congress: Allow DOL Fiduciary Rulemaking Process to Proceed for the Benefit of American Retirement Investors

The Financial Planning Coalition issued the following statement in support of the Department of Labor’s (DOL) re-proposed fiduciary rule, in advance of this morning’s hearing before the House Financial Services Committee’s Subcommittees on Capital Markets and Government Sponsored Enterprises and Oversight and Investigations:

“The Coalition urges Congress to allow the DOL to continue its fiduciary rulemaking process without further delay or obstruction. The DOL has provided – and continues to provide – ample opportunities for input from all stakeholders.

“This strengthened fiduciary rule is long overdue. Under the current 40-year-old regulatory framework, too many Americans receive conflicted advice that is not in their best interest, which eats away at retirement investors’ nest eggs over time.

“The DOL’s re-proposed rule – with some important modifications – will benefit retirement investors and advisers alike, offering a workable, flexible approach across business models. The Coalition’s nearly 80,000 financial planners have committed to providing financial planning services under a fiduciary standard. And since CFP Board adopted the fiduciary standard for Certified Financial Planner™ professionals in 2007, the number of CFP® professionals has grown by more than 30 percent.

“Every American deserves a secure retirement, and the retirement savings advice they receive should always be in their best interest. The DOL’s rule would bring about much-needed re-alignment in retirement advice to better reflect today’s reality, in which Americans are responsible for their own retirement security.”

Ferrara in The Hill: DOL’s fiduciary standard: Good for clients; workable for advisers

The Hill recently published an op-ed by Ray Ferrara, CFP®, Chairman and CEO of ProVise Management Group LLC, former Chair of the Board of Directors of CFP Board, and a former FPA Board Director, endorsing the Department of Labor’s (DOL) proposed fiduciary rule. Ferrara also testified during an August 10 hearing on the rule, convened by the DOL’s Employee Benefits Security Administration.

Excerpt:

Earlier this year, the Department of Labor (DOL) re-proposed a rule that would require financial firms and advisers providing retirement advice to do something the vast majority of consumers already believe they are required to do: provide advice that is in the best interests of their clients.

While many advisers strive to do the right thing even though they are not legally required to do so, incentives to sell products often conflict with best-interest advice to clients. The DOL’s common sense proposal to require those who provide retirement advice to function under a fiduciary standard has unfortunately been met with strong opposition – primarily from financial industry groups. They say the rule is “unworkable.” I disagree. What is unworkable and should not continue is the status quo: a regulatory framework that allows for advice that is not in the best interest of clients and that erodes the retirement savings of millions of Americans.

The DOL’s proposed update of its rule is long overdue. I began my career four years before ERISA became law 40 years ago. There were no Individual Retirement Accounts (IRAs), let alone 401(k) plans; many people relied on their pensions; and stock ownership was the province of the well-heeled. Today, that’s no longer the case. Pensions are almost a thing of the past and individuals are required to take on greater responsibility for their finances, including making choices from among increasingly complex financial products to save for a comfortable retirement. Today, American savers invest more than $14 trillion in 401(k) plans and IRAs.

With this shift in responsibility for retirement planning from employers to individuals, the public has lost an important safety net. Now more than ever they need competent and ethical financial advice from professionals they can trust. Research shows that they want and expect this advice to come from people who are going to put their best interest first.

Opponents to the DOL’s fiduciary rule suggest that the rule will limit advisors’ and firms’ ability to serve middle-class retirement investors and will hurt small businesses. This is not consistent with my personal experience.

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