The North Star isn't just a celestial body — it’s how Deputy Assistant Secretary of Labor Judy Mares characterized an enforceable best interest standard in her remarks at a lively Q&A discussion at the NAPA D.C. Fly-In Forum July 21.
But other speakers at the annual event in Washington, D.C. view the DOL proposed rule differently. In remarks after the Q&A session, Sen. Jon Tester (D-Mont.) said, “From what I have seen in the rule, I don’t think it will work very well” and that its effect on advice “certainly won’t make anyone more prepared for retirement.”
Mares and fellow panelist David Certner, AARP’s Legislative Counsel and Legislative Policy Director for Government Affairs, are sticking to their guns. “People need help — they need people that they trust,” said Mares, arguing that given the size of the IRA and DC markets, one “gets the overwhelming impression that participants need assistance.”
Mares indicated that she considers the rule to be a way to better inform participants as customers of services. “The majority of participants ought to know what they’re paying for and what they’re buying,” she asserted. In a similar vein, Certner remarked, “We understand how important it is for people to get good advice. That’s why we care so much.”
Tester did not evince such confidence regarding the rule’s results, saying that if the proposal is implemented as currently drafted, “Participants will lose. If [the DOL] thinks they’re cracking down on Wall Street, they’re wrong.” He indicated that he considers the effort misplaced and that it will not accomplish what it is purported to, saying that “Main Street did not cause the crash of 2008” and that the kind of regulation that the rule would implement “really is the SEC’s role.”
When asked by NAPA Executive Director Brian Graff whether work on fee disclosure and an incremental approach would not be a good first step in addressing the problems Mares and Certner perceive, Mares responded that the disclosure that occurs now already creates a need to assist participants. “We’ve got such expansive disclosure, consumers are overwhelmed,” she said, adding that it is a challenge for them to understand the information they receive. Certner agreed. “We like disclosure. But it is not often written in a way lay people will readily understand,” he said, adding that in his view, disclosure alone doesn’t work and standards need to be in place along with it.
Both gave assurances that the proposal is not intended merely to drive consumers toward the lowest-cost services possible, and that while fees are a factor behind the rule, they are not the only factor.
Tester offered a stark comment about the rule’s potential effects on advisors. He told attendees that the proposal puts advisors in a difficult position — adding that if the rule is not adjusted, if he were an advisor he didn’t think he would stay in business.
Mares and Certner insisted that the proposal “is not an anti-advisor” effort. But when asked whether the rule wasn’t a lot of work to address the “very small number who are unethical,” Certner admitted that unfortunately, sometimes that is what regulation does. He said that “we’re not talking about every advisor doing bad things” and acknowledged that “there is activity that is not illegal and is allowable,” but that consumers assume that all advisors are acting in their interest.
“You provide education,” Mares said to attendees, adding that “We redrew the line between education and advice.” She said that preventing participants’ conversations with advisors was “not what we intended” and expressed confidence that the comment period will be helpful in clarifying how the rule would address such functions.
Tester struck a similar note. Despite his criticism of the proposal, he said that he thinks that it can be revised in order to make it work. And he added that members of Congress — with whom Fly-In attendees will meet July 22 — would listen to those who are proactive.
In a follow-up session, members of NAPA leadership briefed Fly-In attendees on the organization’s position on the complex rule as set forth in the American Retirement Association’s comment letter to the DOL. Look for details on that session in our next Fly-In post.
