The Department of Labor’s proposed fiduciary rule is overbroad, overreaching and would likely harm the very people the agency seeks to protect, American Bankers Association SVP Tim Keehan testified today during a public hearing on the proposal. The DOL is proposing to update the definition of an “investment advice fiduciary” to extend fiduciary status to advice on rollovers and on investments related to commodities and insurance products like fixed annuities. The Biden administration has pushed for adoption of the rule, saying it would ensure that advisers are not steering clients to products and fees that make advisers money but may not be the best choice for savers.
In his testimony, Keehan questioned why the DOL held the public hearing during the comment period for the proposed rule rather than afterward, as is usually the case to provide stakeholders time to prepare formal responses. He added that a more thorough vetting is appropriate given the proposal would capture many persons who provide valuable services to plans, as well as plan fiduciaries, but who should not be viewed as a fiduciary under either the Employee Retirement Income Security Act or tax code.
“If adopted in its current form, the proposal will likely harm the very plan participants, beneficiaries and IRA account owners that the Department is seeking to protect by making it extremely difficult, complex and costly for banks to make available and deliver the products, services, and information necessary for persons to achieve a financially sound retirement,” he said
The proposed rule is overbroad as it is dependent on the DOL’s subjective interpretation of what constitutes investment advice when communicating with retirement investors, Keehan said. It is overreaching in that it would label as “fiduciary” a series of unrelated, non-fiduciary statements and actions, he added. The proposal also represents a one-size-fits all approach that is designed for the retail marketplace, but with no real analysis of its effects on the institutional marketplace, whose investors are typically well-versed in the functioning of financial markets. The rule should be withdrawn and, if necessary, rewritten to be tailored to the retail marketplace, he said. “This is a job for a dart gun, not a blunderbuss.”
