IRI leadership feels good about 'trajectory' of DOL fiduciary rule

Board members point to SEC's elevation of issue as a top priority

Feb 28, 2014 @ 10:56 am

By Mark Schoeff Jr.

Leaders of a key financial industry lobbying organization emerged from meetings with lawmakers this week confident that their worries about a pending Labor Department investment advice regulation are being heard.

John L. Carter, president and chief operating officer of Nationwide Financial, and Robert Moore, president of LPL Financial, spent Wednesday on Capitol Hill in sessions with members of Congress and their staffs arranged by the Insured Retirement Institute.

Their message was that the Labor Department shouldn't move forward with its rule, which would expand the definition of fiduciary to a wider range of financial advisers to retirement plans, until the Securities and Exchange Commission determines whether to pursue its own fiduciary rule related to retail investment advice.

SEC Chairman Mary Jo White's indication last week that she has made an SEC decision on fiduciary duty a priority is helping Mr. Moore make his argument that the SEC should go first.

“I feel good about the trajectory it's on. (Chairman) White has accelerated this to a top of the queue priority as opposed to a longer-term priority, which is where we were just a few months ago,” Mr. Moore, IRI vice chairman, said in an interview in the Rayburn House Office Building between meetings with lawmakers.

“That enables us in these meetings to reinforce what has been strong support from senators and congressmen about … the sequencing of this topic. It should come from the SEC,” Mr. Moore said.

“The conditions are now emerging to allow that to happen,” he said.

Both regulations would require financial advisers to act in the best interests of their clients, a standard that investment advisers now meet. Brokers are held to a suitability standard, which allows them to sell higher-priced investment products as long as they meet their clients' needs.

Mr. Moore and many others in the financial industry want the SEC to go first so that the DOL and SEC rules don't impose two different regulatory regimes on brokers. The House approved a bill last fall that would mandate that the SEC take the lead.

The Obama administration threatened to veto the bill.

Critics said that the measure would effectively kill the Labor Department rule if the SEC decides not to proceed.

Labor Department officials say that investment advice standards for retirement plans must be raised to protect workers building their own nest eggs from conflicted advice.

The Labor Department rule was originally proposed in 2010 but withdrawn amid fierce criticism from the financial industry, which argued that it would subject brokers selling individual retirement accounts to fiduciary duty for the first time and drive them out of the advice market for middle-income investors. It is scheduled for re-proposal in August.

The IRI isn't trying to kill a fiduciary duty rule, Mr. Moore said.

“We are not hopeful of the status quo,” he said. “This is an opportunity to move forward constructively around clarifying a very, very vital point of orientation around serving investors' best interests.”

Overall, 16 members of the 28-member IRI board visited Capitol Hill on Wednesday to talk to 24 members of Congress and their staff members. Another prominent topic was protecting tax deferrals for investments in annuities and other insurance products.

The IRI board was in Washington on the same day that House Ways and Means Chairman Dave Camp, R-Mich., introduced draft legislation that would modify tax treatment of retirement plans.

In his meetings, Mr. Carter said that annuities are a key component in ensuring that people have an income stream after they stop working.

He said that $2 trillion in retirement savings are invested in annuities.

“Anything that would affect those savings vehicles are something that congressional leaders have been interested and open in talking about,” said Mr. Carter, who is chairman of the IRI.

Lawmakers want to hear about “the far-reaching effects of affecting that tax-deferred growth.”

The IRI is trying to educate members of Congress about how financial advisers are relating retirement savings to other aspects of wealth management, such as financing health care costs.

“It's more of a holistic retirement discussion that advisers are having,” Mr. Carter said.


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