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The negative impact of the Fiduciary Rule is clear: Retirement investors are seeing higher fees, less access to retirement advice, and fewer options. The Department of Labor (DOL) initiated the rulemaking process to create a new system that protects investors. The problem is the exact opposite happened, and now retirement investors are feeling the repercussions.
“Each firm is interpreting the rule differently, and it is impacting our credibility.”
— Deborah Koller, Principal, Koller Financial Services, LLC
In previous posts we highlighted a study by the U.S. Chamber on the impact of the Fiduciary Rule. The study found, among many things, that over 13 million investment accounts face reduced choices of retirement savings products and 6 million accounts face higher costs in the wake of this new regulation. Some might look at these statistics and see just numbers, not people. The sheer magnitude of millions of retirement investors losing services and paying higher costs should raise concern for everyone. What also must not be overlooked is the impact on future retirement investors who could be discouraged early on and decide not to even bother starting accounts. And we all know the benefits of compound interest!
“All the regulations and rules are pushing me away from helping people who need help.”
— Joe Cope, Founder and CEO of CopeConnelly
On September 7, 2017 the U.S. Chamber hosted an event bringing together lawmakers, associations, and financial service providers to speak about the Fiduciary Rule and the impact it has had and could have if fully implemented. A panel of financial service providers gave firsthand accounts of how the rule has hindered their ability to provide services to their clients – Americans looking to save for their retirement.
Rep. Phil Roe (R-TN) spoke about how much he and his staff valued access to a retirement plans when he started medical practice over 35 years ago. He indicated it would be tough under the rule to offer these benefits if he was starting today. Without the ability to offer these types of benefits small and mid-size businesses, like his medical practice, will lose a valuable tool when it comes to hiring and keeping the best talent.
"I have been in business for the past 29 years manufacturing gear for the military market. We have always prided ourselves on providing an outstanding benefit package to our employees that includes a retirement savings plan. The long term success of this benefit requires advice from professional investment advisors. Investing is very risky and professional advice is essential. This rule would put a significant burden on small businesses and their employees, making it less likely that we will be sufficiently prepared for retirement."
—John Raine, President, Raine Inc. (Anderson, IN)
And whether you are an individual or a business you deserve access to the best services and advice available. In some sense, choosing a financial professional is similar to choosing a doctor. You are looking for someone whom you have confidence in and you are entrusting them with your long term financial health. Unfortunately the Fiduciary Rule makes that difficult by tying the hands of financial advisors who are trying to navigate the rule.
Younger professionals who are just starting out in particular could easily grow frustrated and skeptical, and decide against starting retirement accounts. We are always telling people they should plan for the future, but we can’t say that in one breath and in another do the opposite by putting rules in place that prevent or discourage that. If we want people to take responsibility for their financial futures we need a rule that helps and protects people, not limits their choices and makes them skeptical.
Given the uncertainty surrounding the future of the harmful DOL rule, we now have an opportunity for policymakers to act in a way that truly protects and empowers people so that they can lead financially confident lives.