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Financial Planning Coalition Submits Comment Letter Opposing Delay of DOL Fiduciary Rule

Washington, D.C. – 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 submitted a comment letter opposing the U.S. Department of Labor’s (DOL) proposal to delay for 60 days (Delay Rule) implementation of the DOL Fiduciary Final Rule (Final Rule) approved in April 2016.

“The Coalition believes that a strengthened fiduciary rule under ERISA is essential for America’s Retirement Investors and is workable for Advisers, and we strongly support implementation of the Department’s Final Rule,” the group wrote. “For those who truly want to strengthen retirement security and ensure that Advisers protect their clients’ best interests, allowing the Final Rule to be implemented without delay is the best way to achieve those goals. The Final Rule is fully consistent with the principles of a true fiduciary standard under ERISA. Delaying implementation of the Final Rule is unnecessary, unwarranted and will only serve to derail this long overdue reform necessary to protect and preserve Americans’ retirement savings.”

The Final Rule, which establishes critical new safeguards for retirement investors, is scheduled to begin implementation on April 10, 2016. The Delay Rule, if approved by DOL, would delay implementation of the Final Rule until June 9, 2017, cause harm to consumers, and trigger unnecessary confusion in the financial services industry. The views stated in the comment letter, which can be found here, are based on the real-world experience of the Coalition and its more than 80,000 financial professionals and other stakeholders in applying the fiduciary standard across business and compensation models. The letter outlines that:

  • Delay Will Harm Consumers
    When consumers seek financial advice, they face a marketplace in which it is virtually impossible to distinguish a salesperson from an Adviser or between those Advisers who are legally obligated to provide advice in their best interest versus those who are not. Retirement investors lose $1.4 billion every month ($2.8 billion for a 60-day delay) due to conflicts of interest and they need the Final Rule to be implemented to stem these monthly losses.
  • DOL’s Cost-Benefit Analysis is Inadequate
    The Department’s cost-benefit analysis has not met the requirements of the Administrative Procedure Act (APA) and Executive Orders, which affect the level of regulatory analysis conducted by Federal agencies.

    1. DOL has not provided an adequate statement of the need for the delay. The Presidential Memorandum directs DOL to modify the Final Rule if it concludes the Final Rule, among other things, is inconsistent with the new administration’s priorities. However, a statement concerning a change in priorities, without additional explanation, is not an adequate statement of need for the delay.
    2. In addition to not providing adequate evidentiary support for the delay, DOL fails to address multiple federal court opinions upholding the Final Rule.
    3. DOL has not provided a clear identification of a range of regulatory approaches.
    4. DOL’s Delay Rule proposal does not adequately take into account the scope of harm to investors from the 60-day delay, a critical distinction as retirement investors’ losses will be compounded over the life of the investment product.
    5. DOL does not adequately address how the Delay Rule may contribute to unnecessary marketplace confusion and harms companies that have acted in good faith to implement the Final Rule.
    6. DOL does not address how the Delay Rule is stifling marketplace innovation. Recent developments have shown how the Final Rule is transforming the way commission-based advice is offered, with enormous potential benefits for all investors, not just those saving for retirement.
  • Delay is Contrary to ERISA’s Language and Purpose
    The Supreme Court has repeatedly held that the validity of a regulation will only be sustained if it is “reasonably related to the purposes of the enabling legislation.” In its ruling, which upheld the Final Rule in all respects, the U.S. District Court for the Northern District of Texas reasoned “ERISA was enacted on the premise that the then-existing disclosure requirements did not adequately protect retirement investors, and that more stringent standards of conduct were necessary.”
  • DOL Has Not Provided Good Cause for Immediate Delay
    The Coalition contends that DOL has not provided good cause under the APA for allowing the Delay Rule to become immediately effective upon publication in the Federal Register.
  • Prior Precedent is Not Applicable
    Current delay is fundamentally different from previous delays of DOL rules which had been published in the Federal Register, but were not yet effective.
  • Delay is Unnecessary
    The Final Rule addresses concerns raised by firms, industry organizations, consumer and public interest organizations, and Members of Congress. The process worked. Many companies and organizations that were initially skeptical later stated publicly that the DOL listened carefully and responded to their concerns.

In conclusion, the Coalition wrote: “Importantly, while many Advisers seek to do what is best for their customers, others take advantage of regulatory gaps to steer their clients into high-cost, substandard investments that pay the Adviser well but eat away at retirement investors’ nest eggs over time. The Coalition believes that requiring an Adviser to work in the retirement investor’s best interest is an essential and long overdue reform. We urge the Department to move forward expeditiously with implementation of the Final Rule.”


Financial Planning Coalition Files Amicus Brief in Support of Department of Labor Fiduciary Rule

Coalition Encourages Court to Dismiss Motion for Summary Judgment

Washington, D.C. – 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) – yesterday filed an amicus brief in the U.S. District Court for the Northern District of Texas, supporting the Department of Labor’s (DOL) fiduciary rule and opposing efforts to stop the rule from taking effect.

“The Coalition submits that the experiences of its professionals and their clients show that a broadly applicable fiduciary standard represents a win-win for the industry and the public,” the Coalition wrote in its brief. “The current regulatory framework, however, fails to align advisers’ interests with investors’ by leaving open significant loopholes that allow for the sale of financial products that may not be in the best interests of the investor. The Department’s strengthened fiduciary rule is therefore necessary and appropriate to protect the public.”

In its amicus brief, the Coalition specifically notes their opposition to the current attempt to stop the rule through a court challenge.

The Coalition’s full amicus brief, which can be viewed here, outlines three critical points:

  • Investors currently suffer from a lack of complete, truthful disclosures;
  • Empirical research and the Coalition’s practical experience confirm that middle income investors will retain ready access to professional financial advice under a fiduciary standard of conduct; and
  • Based on CFP® professionals’ experience under standards similar to those required by the Best Interest Contract Exemption, the rule provides a workable solution to allow for advisors to receive transaction-based compensation while providing advice that is in the best interests of the client.

The DOL, through careful deliberation and review, has crafted a final fiduciary rule that reflects extensive public comment and articulates common-sense standards for ensuring financial advice in investors’ best interest. The rule will significantly benefit and protect retirement savers with additional consumer protections and access to retirement advice.

The Coalition’s experience – involving nearly 80,000 financial-planning professionals of all business models and sizes – offers a reality that starkly contrasts with the speculation from the rule’s opponents, and provides the court with a unique perspective on the issues in this case. Thousands of CFP® professionals and FPA and NAPFA members across the country currently provide fiduciary-level services to investors with business models requiring no or very low minimum assets under management.

A 2013 Princeton Survey Research Associates Inc. study revealed that professionals operating under a fiduciary standard reported stronger asset and revenue growth for their clients. Further, a 2014 study showed more than 80 percent of financial professionals who had switched to a fiduciary standard reported that the change was mostly positive for their clients and their own practice. One company noted that it introduced new products with lower surrender fees, saying its products are more “flexible” and “fit better with new trends, customer preference and the market.”

The Coalition firmly believes that when financial professionals operate under a fiduciary standard of conduct, they can continue providing financial advice to investors of all income levels that serves the investors’ best interests.