Brian P. O'Shea


November 08, 2017


The Department of Labor’s (DOL) Fiduciary Rule is now making it harder for families to save for their future. New research shows that the DOL rule is actually increasing the cost of investing and retirement savings for Americans. This threatens to put a secure financial future beyond the reach of those that need it the most.

The DOL is now revaluating the rule—and for good reason. Retirement savers are in many cases being forced to deal with the increased cost of access to investment and financial tools, driven by the effects of the rule on the retirement savings industry. The rule has forced firms to change business models and pricing structures and has increased compliance and liability costs. Unfortunately, higher costs and decreased returns on investment will discourage overall levels of investment and savings. In the worst-case and now all too real scenario, small investors have seen themselves shut-out, unable to receive professional retirement/investing advice. In short, driving up the cost of saving for retirement is making expert advice a privilege for the wealthy and an unaffordable luxury for the vast majority of Americans.

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Research conducted by the U.S. Chamber found that 6 million investment accounts already face increased costs directly related to the Fiduciary Rule. Another recent study by the Securities Industry and Financial Markets Association (SIFMA) estimated $4.7 billion of compliance fees will be passed onto savers and investors following the fiduciary rule’s implementation.

The rising costs can primarily be explained by the change in the pricing of financial advice. As advisors are faced with the burden of a poorly constructed regulation, many have been forced to change how they price retirement savings products and services. In many instances, the traditional commission-based model is quickly being replaced by a model centered on fee-based accounts and flat rate charges for advice. While fee-based accounts may be appropriate for some investors, they are a not a solution for everyone. Investors who have for years been comfortable with paying small commissions in order to trade could now be forced to pay annualized fees that are much higher. 

One respondent from the U.S. Chamber’s research described the situation well:

There will be advisors that will move to fees, and they may not deliver the full service model on a fee-based platform. And the client's paying more for, in effect, the same level of service…which is not really in their best interest.

The immediate impact of these additional costs will mean less money saved and reinvested. In the long run, individuals and families will see a sizeable decrease in their potential retirement savings. That’s not a financial future our country can afford.

About the authors

Brian P. O'Shea