The Department of Labor’s final fiduciary rule is “deeply flawed in several critical areas” that prevent it from functioning properly, ABA said in a comment letter today. The letter came in response to a DOL request for information on the rule as part of an ongoing review ordered by President Trump.
Among other things, the definition of who is considered a fiduciary under the rule is unclear, resulting in confusion among financial institutions and ultimately, harm to retirement investors, ABA said. The association urged DOL to either rescind or significantly revise the rule to provide a sharpened, targeted definition of “fiduciary” that would establish discernible boundaries and increase certainty about compliance.
Along with the letter, ABA included the results of a recent survey on the fiduciary rule that shows that banks are already re-evaluating and reducing — and in some cases, eliminating — their offerings to retirement customers. For example, 30 percent said they have eliminated or reduced the number of retirement products or services they offer, while 38 percent noted that customer relationships have been “fragmented” as a result of the bank no longer being able to provide holistic financial advice.
When it came to compliance, more than 80 percent of banks surveyed said they were sometimes or often unable to determine with certainty whether they are in compliance with the fiduciary rule, and two-thirds believe it will increase their liability and litigation risk under the Employee Retirement Income Security Act and the Internal Revenue Code. Sixty-three percent noted that customer accounts with $25,000 or less have been most affected by the rule.
ABA has long advocated for major changes to the fiduciary rule to ensure that it does not negatively affect the services available to bank customers. The association will continue to provide feedback to the DOL as it continues its review of the rule. For more information, contact ABA’s Tim Keehan.