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NAIFA testified on the first day of the two-day (December 12-13) Department of Labor (DOL) fiduciary rule hearing. President Bryon Holz, who appeared with one of his clients, represented NAIFA, telling DOL of the harm its proposed rule would cause for middle-income retirement investors. NAIFA will also submit formal comments to the DOL ahead of the January 2 deadline for close of comments.

NAIFA told DOL that the proposed new rule would deny many low- and middle-class retirement investors access to high-quality professional in-person investment advice. This is because of the proposed rule’s burdensome compliance costs. Even worse, because of already-applicable rigorous state-level and SEC Best Interest rule requirements, the extra costs that come with a new DOL fiduciary rule would not provide additional protection to retirement investors.

NAIFA conducted a survey of its membership to gather data on current practices in the retirement investment advice space. Results of the survey indicate that some 70 percent of retirement investment advisors currently do not require a minimum level of investment (the threshold) before they will accept a retirement investor client. However, if the proposed fiduciary rule is finalized, only 28 percent will be able to accept a retirement investor client without a threshold (minimum investment) requirement.

NAIFA also pointed to the current standards that protect retirement investors from potential conflicts of interest, including the robust rules in place in most states following the standards set by the National Association of Insurance Commissioners (NAIC). In short, there is no need for new standards, including a fiduciary standard, for retirement investment advisors and their clients, NAIFA said. At the conclusion of NAIFA’s testimony and questioning, DOL staff not only thanked Bryon Holz, but also applauded the willingness of Bryon Holz’s client to step up to testify on the proposed rule, a rare compliment from a regulator.

NAIFA’s testimony will be repeated, and fleshed out, in the comments the association will submit to DOL prior to January 2.

Prospects: There is considerable pressure from lawmakers as well as from the retirement savings community to withdraw (or materially change) the proposed fiduciary rule and its accompanying prohibited transaction exemptions (PTEs). However, thus far, DOL appears dug in, so there is little optimism about chances for withdrawing the proposal or modifying it to an extent that would make it less adverse to retirement investors. However, it is widely expected that the proposal, after it is finalized, will be challenged in court. Industry experts are optimistic that the court challenge would be successful.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Senior Director – Government Relations, at mhedge@naifa.org.