FinancialPlanning (April 25, 2024) - By Tobias Salinger
Supporters and opponents began weighing in with their reactions about a minute or so after the Labor Department issued the final version of its retirement advice rule earlier this week.
As shown by the roundup of 18 statements in response to the "retirement security rule" below, the groups praising the regulation include the AARP, the CFP Board, the National Association of Personal Financial Advisors and the Consumer Federation of America, while the ranks of those against it comprise the Insured Retirement Institute, the Securities Industry and Financial Markets Association, the National Association of Insurance Commissioners and other groups. The latter commenters will almost certainly file a lawsuit challenging the rule in court and push for Congress to use its power to block the regulation over the next two months.
Otherwise, the rule will expand the fiduciary duty requiring recommendations by financial advisors and other retirement professionals for rollovers from 401(k) plans to individual retirement accounts or certain insurance products to put a clients' best interest first.
The regulation takes effect Sept. 23, although some parts carry a one-year transition period after that date for full implementation, according to a Labor fact sheet. While many advisors already follow fiduciary standards with all of their clients, there is "always going to be a big impact" from rules of this kind on registered investment advisory firms and other professionals working with retirement savers, according to Leila Shaver, the founder of compliance firm My RIA Lawyer.
"It takes a lot of money to implement the processes and supervision required to comply with the rule," she said in an interview.
The rule entails "different work and disclosure" but "not necessarily more work and disclosure" for most advisors, according to David Lau, CEO of DPL Financial Partners, a fee-only insurance consulting network that RIAs use for annuities and other products without commissions. Asked about the likelihood that the industry will file a lawsuit to try to overturn the rule, Lau put the possibility at "about 1,000%," but he said that this regulation is "built better to stand up to challenge" than the one overturned by an appeals court decision six years ago.
"Retirement is such a critical and sometimes vulnerable financial time for a consumer," Lau said. "To require that they're getting fiduciary advice about such important decisions I think is such complete common sense."
In contrast to many other insurance groups that are decidedly hostile to the regulation, Lau rejected the suggestion that it could threaten access to advice about retirement products.
"Annuities are really important, good products," he said. "To have the confidence that you're going to be able to get them from a fiduciary in a low-cost manner will only help expand the industry over time."
Scroll down the slideshow to see reactions from 18 different advocacy groups, professional associations and government agencies. For a look at FP's analysis of the Labor Department's issuance of the rule, click here. And to look at two potential roadblocks to it going into effect ahead of the election, follow this link.