The hearings may be over, but it’s beginning to look like the opponents of the Labor Department’s fiduciary proposal have only begun to fight.
Last week, the Financial Services Institute (FSI) published a paper by Oxford Economics titled “Economic Consequences of the U.S. Department of Labor’s Proposed New Fiduciary Standard” that, among other things, provided its estimate that the proposed rule will cost the independent financial services industry and investors nearly $3.9 billion in total startup costs to implement the rule, or about 20 times DOL’s preferred cost estimate. A figure that, the paper goes on to note, “does not take into account the cost of investors’ lost access to advice or the ongoing costs of maintaining compliance with the rule.”
Consequence ‘Says’
Additionally, the researchers claim that, “…if the rule is implemented, only high net-worth investors will be able to access and afford professional retirement investment advice.” The paper also notes that the proposed rule will result in industry consolidation likely to force small broker-dealers out of business, while also cautioning of the “…expanded potential for systemic risk in the retirement savings market as savers are increasingly pushed into the same set of standardized ‘low-cost’ assets.”
At the same time, the National Black Chamber of Commerce (NBCC), which represents 100,000 black-owned businesses and has more than 140 nationwide chapters, wrote Labor Secretary Thomas Perez on August 19 to express their concerns that the rule would “severely restrict African Americans’ and low to moderate-income Americans’ ability to save for retirement,” as well as making it “more difficult” for their small business owner members “to sponsor retirement savings plans for themselves and for the benefit of their employees.” The group noted similar concerns expressed in 2011, and said they were “disappointed that the DOL did not take our concerns into account with this new proposal.”
TV Tries
Meanwhile, you may have noticed a new series of TV ads. Americans to Protect Family Security, a coalition of industry groups (see footnote below) representing financial advisors and insurance companies, has been running a couple of new ads. One features a couple having dropped their daughter off at college — and fretting about how they’re going to be stuck talking to a “robot on the phone” for financial advice. The other has a small-business owner concerned that his employees will have a hard time getting information about the 401(k) plan offered by his company, adding, “Washington: messing up our 401(k).” Both spots end with the words, “Tell Congress: Fix this now!”
What’s interesting is that if you weren’t aware of the current debate of the “conflict of interest” proposal, you’d hardly know what “Washington” is doing to mess up your 401(k).
Footnote
1. The coalition includes the American Council of Life Insurers (ACLI), the Association for Advanced Life Underwriting (AALU), GAMA International, the Insured Retirement Institute (IRI), the National Association for Fixed Annuities (NAFA), the National Association of Independent Life Brokerage Agencies (NAILBA) and the National Association of Insurance and Financial Advisors (NAIFA).
