The Insured Retirement Institute (IRI) submitted a response to the Department of Labor’s (DOL) Request for Information (RFI) showing the harmful effects already occurring under the partial implementation of the fiduciary rule.
Through IRI’s latest comment letter submitted on Aug. 7, Department of Labor was presented with new evidence demonstrating the negative consequences the fiduciary rule is having on both the insured retirement industry and retirement savers.
IRI President and CEO Cathy Weatherford issued the following statement:
“IRI appreciates the opportunity to present the Department of Labor with new information confirming our concerns regarding the implementation of the fiduciary rule and to offer Secretary Acosta solutions for creating a workable best interest standard. This new information shows the rule is already negatively impacting the ability of many American savers to maintain access to a wide range of financial products and services. At a time when Americans are increasingly self-funding their own retirements, it is vital that access to advice and lifetime income products be preserved.
“IRI continues to urge the Department to delay the applicability date for all remaining aspects of the fiduciary rule. Furthermore, we urge the Department to collaborate with the appropriate federal and state regulators – including the Securities and Exchange Commission (SEC) and the National Association of Insurance Commissioners (NAIC) – to develop a consistent and workable best interest standard that will allow consumers to access the advice they need to achieve a financially secure retirement.”
Some of the key points from IRI’s response are highlighted here:
• The Department should delay the January 1, 2018, applicability date until January 1, 2020. As it currently stands, the implementation timeline is unworkable.
• New evidence gathered since the June 9, 2017, implementation date has demonstrated that consumers are being prevented from accessing products and services. The number of accounts that have been orphaned (i.e., accounts no longer serviced by an adviser, leaving investors on their own) has increased significantly due to the rule. In a July 2017 survey of IRI members, a number of IRI distributor members reported that approximately 155,000 of their clients have already been orphaned, with far more accounts expected to be impacted as implementation of the rule proceeds.
• The contract requirement and warranties in the BIC exemption are an unnecessary incentive to enforce compliance and should be eliminated.
• A recent study found that plan sponsors view litigation risk as almost as important as “improving participant outcomes.” This fear of litigation is driving many plan fiduciaries to focus on fees to the exclusion of other important considerations, an outcome that is incompatible with the goals of the rule.
• The Department should engage in a constructive dialogue with the SEC, FINRA, NAIC and state insurance departments to establish consistent and clear standards for recommendations made with respect to all securities and insurance products.
• The amended PTE 84-24 should be made available for all annuities and any compensation or other payments that satisfy the impartial conduct standards.
• The disclosure requirements under the BIC exemption are exceedingly and needlessly complex, require massive and expensive information technology re-design and build-outs to support, and are not designed to focus investors’ attention on the most important information. These disclosure requirements, and those required under the amended PTE 84-24, should leverage existing disclosure requirements.
• The Department should provide true grandfathering for all arrangements and transactions entered into before the June 9, 2017, partial implementation.
• The Department should revise the definition of fiduciary and the impartial conduct standards to address the concerns which have been consistently presented by the insured retirement industry over the past two years
About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 30 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at www.irionline.org.