While the comment letters opposing the Labor Department’s fiduciary proposal tend to be more “provocative” (particularly those submitted by “anonymous”), a fair number of the more than 900 comments received are strongly supportive of the measure in its current form — and then some.
Here’s a sampling:
From Capitol Hill
For example, a group of Democratic members of Congress — Robert C. “Bobby” Scott (Va.), Maxine Waters (Calif.), John Conyers, Jr. (Mich.), Elijah E. Cummings (Md.), Keith Ellison (Minn.), Raul Grijalva (Ariz.), Eleanor Holmes Norton (D.C.), Barbara Lee (Calif.), Bobby L. Rush (Ill.), Al Green (Texas), Jim McDermott (Wash.), Judy Chu (Calif.), Ruben Hinojosa (Texas), and Betty McCollum (Minn.) — all threw their support behind the need for a rule update, and the fiduciary’s proposal to provide that.
A letter by a sent by Sens. Jon Tester (D-Mont.), Gary Peters (D-Mich.), Joe Manchin (D-W.Va.), Heidi Heitkamp (D-N.D.), Claire McCaskill (D-Mo.), Angus King (I-Maine), Tom Carper (D-Del.), Ben Cardin (D-Md.), and Joe Donnelly (D-Ind.), set a more cautionary tone. The letter was broadly supportive of the DOL's approach, but called for an extension of the comment period to a total of 120 days “to ensure relevant stakeholders are able to provide thoughtful comments.”
Consumer Federation of America
In throwing its support behind the proposal, the Consumer Federation of America — an early and vocal supporter of the proposal (even before it was published) — cited the shifts in the retirement market, the gaps in financial literacy, and the heavy dependence of many on the recommendations of advisers, going on to note that “basic market observation provides evidence of investor harm,” and that the “risks of harm are greatest when workers change jobs or leave the workforce.”
The CFA’s comments take issue with the notion that the rule’s proposed “movement” of the line between education and advice to include in the latter category reference to specific funds within the plan.
“The education carve-out appropriately preserves financial firms’ ability to offer bona fide education while ensuring that specific investment recommendations are classified as advice,” the CFA writes in the letter. “We agree with the assessment of both the DOL and the GAO that an investor would reasonably view these types of tools, not as general education, but as providing them with a recommendation that is specifically directed at them, that is based on their personal circumstances, and that is clearly designed to be acted upon.”
The CFA also commends the DOL for proposing a narrow seller’s carve-out that applies only in the large plan context, and urges the DOL to maintain this framework in a final rule, and also called on the Labor Department to clarify that the stipulation that the advice must be delivered “pursuant to an agreement, arrangement, or understanding” does not require mutual agreement. The CFA did acknowledge, however, that some commenters have raised the concern that firms would not be able to market their services without triggering the definition of fiduciary investment advice, and that, “while we believe these concerns have been exaggerated, there is enough ambiguity on the point to justify a clarification, and so the CFA notes that the Department should clarify that firms can market their services without necessarily triggering the definition of fiduciary investment advice.”
Center for American Progress
Also in support of the fiduciary proposal, the left-leaning Center for American Progress dismisses concerns that a fiduciary standard will punish “small savers,” going on to note that “the financial industry routinely warns about constrained access when efforts are made to restrict predatory or misleading credit products, such as high-cost mortgages, auto loans at inflated rates, and payday loans that the borrower is unlikely to pay back. Yet just as we do not want consumers to purchase excessively high-cost and risky products, we do not want consumers to receive high-cost, risky retirement advice.”
They not only approved of the Best Interest Contract Exemption approach, but called for a strengthening of disclosures there, and extending them “…to all retirement savings products, by incorporating in the pre-purchase transaction disclosure a “20/20” disclosure: the effect of fees on a $20,000 initial investment over a 20-year period.” The Center also recommended adding an annual retirement “receipt” that indicates the percentage and dollar amount of fees by fund in addition to compensation received, and that those pre-purchase and annual disclosures should ultimately be required for all retirement savings vehicles such as 401(k)s and IRAs, “…even beyond the scope of this rule.”
They also would like to end forced arbitration in retirement investment advice contracts, and to extend the proposed IRA protections to other tax-advantaged savings vehicles, such as 529s and HSAs.
Older Population Coalition
A coalition of groups calling itself “national organizations concerned with the well-being of America's older population” (including, among others, Alliance for Retired Americans; AFSCME Retirees; American Society on Aging; B'nai B'rith International; Center for Elder Care and Advanced Illness, the Pension Rights Center, and the Service Employees International Union) echoed the language of the Labor Department proposal in its supporting comments, referencing “…loopholes in the current rules” that “…make it easy for some advisers to take advantage of hard-working Americans and line their own pockets with their retirement savings,” citing the White House Council of Economic Advisers' estimate that “…hidden fees, unnecessary risks and bad investment advice rob Americans of as much as $17 billion each year.”
“This rule will ensure that all financial professionals who offer retirement investment advice must follow the same rules to make recommendations designed to serve the best interests of consumers by keeping costs low, recommending sound investments, and protecting retirement savings from unnecessary risks,” their letter added.
Secretary of the Commonwealth of Massachusetts
Comments from Secretary of the Commonwealth of Massachusetts William F. Galvin (D) broadly supported the proposal, citing abuse in self-directed IRAs, sales of alternative investments as well as in IRA Rollovers, notably retirees who were “aggressively cold-called” to take their pension as a lump sum with “false promises and guarantees.” However, his comments did seek clarification that ERISA fiduciary rules do not preempt state securities law jurisdiction, and to revise BIC such that advisers can not include mandatory pre-dispute arbitration provisions.
And then there was the comment submitted by Sherrill Futrell of Davis, Calif., who said “I appreciate and support the Dept. of Labor in its' 'fiduciary interest' rule making and hope this letter helps convince you that Americans care about their retirement savings. Just like the self-interested advice they give, retirement advisers are fighting the rule to protect the money they make off investments that earn them more money, even if they aren’t as good for my bottom line.”
The comments to the Labor Department’s “Conflict of Interest Proposed Rule” can be viewed here in their entirety.
