Senators Jon Tester (D-MT), Joe Donnelly (D-IN), Heidi Heitkamp (D-ND), and Angus King (D-ME) submitted a letter to the DOL to “ensure that rules related to retirement savings do not work at cross-purposes in a way that could limit investor access to education and increase costs for middle-class Americans” with respect to proposed changes to the ERISA definition of “fiduciary.” The Senators expressed their concern that “the rule in its current form could stifle access to meaningful investment advice for millions of Main Street investors.”
The Senators also recommended that the DOL: (i) maintain a neutral business model; (ii) maintain access to a variety of products in today’s marketplace; (iii) provide educational materials to help prepare individuals for retirement; (iv) prevent “significant” leakage at the point of rollover, as “evidenced by GAO’s study, ‘401(k) Plans, Policy Changes Could Reduce the Long-term Effects of Leakage on Workers’ Retirements Savings’“; (v) allow financial professionals to engage small business without triggering fiduciary duties; (vi) permit current investors to forgo the proposed process if they so choose; (vii) solicit meaningful input from the SEC and FINRA; and (viii) engage relevant stakeholders, including the Senators’ offices, as the rulemaking process continues.
Lofchie Comment: The DOL’s rule proposal with respect to fiduciaries has attracted a fairly remarkable range of opposition from: both buy-side and sell-side market participants, both Democratic and Republican elected officials, and other regulators. In ordinary times, it would seem odd for a regulator to proceed with pushing forward a rule that has attracted criticism from so many divergent sources.
In any case, the opposition to the rule makes a common point: burdens and limitations put on the financial industry are also burdens and limitations put on those served by the financial industry. Expenses imposed on the financial industry must be passed through to customers. Prohibitions put on the financial industry are prohibitions that are also passed through to customers. None of this is to resist the notion that it is proper to impose burdens, limits, and prohibitions on the financial industry. But those who do must be willing to justify the indirect negative effects of their regulations, and not to pretend that their effects are not felt by customers. When regulators are willing to have an open discussion of the full costs, as well as the benefits of regulation, then society can have a real conversation as to what rules truly make sense.