President Joe Biden’s administration rolled out its “retirement security rule” proposal at the White House last week with a speech that drew immediate pushback.
The Labor Department’s plan to rewrite the definition of “fiduciary” — the most significant potential change to the Employee Retirement Income Security Act since the 2016 rule that was vacated by a court decision — is already dividing the industry between supporters and opponents. With public comments and a hearing plus inevitable industry lawsuits poised to drag out the debate for months and years, the slideshow below covers more than two dozen excerpts from the proposal on the rationale, research and major possible impact to the industry.
In his speech, Biden criticized “bad annuities” and “junk fees” that he said are hurting the nest eggs built up by 401(k) savers and individual retirement account holders. His comments omitted an estimated cost of compliance for the industry of more than $1.5 billion over 10 years.
“Now, let me be clear about something,” Biden said, according to the White House transcript of the Oct. 31 remarks. “Most financial advisors give their clients good advice at a fair price and are honest with them. But that’s not always the case. Some advisors and brokers steer their clients toward certain investments not because it’s the best interest of the client; because it means the best payout for the broker. I get it, understand it. But I just want you to know we’re watching, to put it colloquially. Now, look, they’re putting their self-interest ahead of their clients’ best interest. And they’re scamming Americans out of hard-earned money. People should be able to trust that when they get advice from a so-called expert, they’re getting real help, not getting ripped off.”
The proposal drew praise from groups such as the AARP, the CFP Board and consumer and union advocates uniting as the Save Our Retirement coalition. Trade and advocacy groups like the National Association of Insurance and Financial Advisors, the Financial Services Institute, the American Council of Life Insurers and the Insured Retirement Institute criticized the prospect of another new regulation, though.
“The President’s proposed fiduciary rule will harm the very consumers he wants to help and deepen the nation’s retirement crisis by limiting access to sound financial advice,” IRI CEO Wayne Chopus wrote in response to Biden’s speech. “IRI will fight this latest proposal as tenaciously as we fought and defeated the 2016 rule. We are committed to protecting the rights of workers, retirees, and their families to ensure that they are not deprived of access to retirement savings strategies, choice of products to execute those strategies, and the right to choose their financial advisor on terms that best fit their needs. President Biden and the Department of Labor showed a fundamental misunderstanding of how the insurance industry and annuity products work for the benefit of consumers.”
To see 26 key excerpts from the proposal that will be central to the debate, scroll down the slideshow. For a sampling of the reaction across the industry to last week’s announcement, click here. And to see 24 other new rules and proposals to watch, follow this link.