Financial Planning Coalition: DOL fiduciary rule delay harms investors, violates regulatory requirements

The coalition of groups representing investment advisers voiced its warning in a comment letter on the delay proposal.

Mar 15, 2017 @ 6:14 pm

By Mark Schoeff Jr.

+ Zoom

Delaying the Department of Labor's fiduciary rule would harm investors and violate regulatory requirements, groups representing investment advisers asserted in a comment letter on Wednesday.

The Financial Planning Coalition said that the proposal to push back implementation of the regulation for 60 days would cause investors to lose money over that period due to conflicted advice. It also asserted that the DOL failed to follow the Administrative Procedure Act in promulgating the delay rule.

The FPC -- which is comprised of the Financial Planning Association, the National Association of Personal Financial Advisors and the Certified Financial Planner Board of Standards Inc. -- took advantage of the DOL's claim in the delay proposal that putting off implementation would reduce investors gains by about $104 million, while lowering compliance costs for financial firms by $8 million.

"The department needs to address why it believes a delay is warranted when, under its own analysis, investor harm greatly outweighs any cost savings for the industry," the FPC wrote. "The Department has not adequately explained what environmental changes, if any, led the Department to believe that the final rule and regulatory impact analysis completed less than a year ago are now inadequate or defective."

The DOL is seeking to extend the April 10 implementation date of the rule to give itself time to conduct a review of the rule that President Donald J. Trump called for in a Feb. 3 memo. Mr. Trump told the agency to modify or repeal the regulation, if it found that it limited investors' access to advice or increased litigation risk for firms.

But the FPC said that making the delay effective immediately when the final delay rule is published in the Federal Register, likely sometime just before April 10, violates rulemaking parameters. The DOL failed to demonstrate "good cause" for such a move, the FPC argued. Rather the delay should not begin until 30 days after publication -- a time that would be after the April 10 implementation date.

"An emergency of an agency's own making does not constitute good cause," the FPC wrote. "Second, contrary to the Department's assertion, good cause does not exist merely because an incoming administration considers a regulation defective."

The FPC also asserted that the DOL has not taken into account several victories for the fiduciary rule in court cases and the fact that the financial industry has already started lowering the costs of advice and products in anticipation of the rule becoming applicable.

Proponents of the rule say that it is necessary to protect investors from conflicted advice that leads to the sales of inappropriate, high-fee investments that erode savings. Financial industry opponents say that the regulation is too complex and costly and would price investors with modest assets out of the advice market.

The comment deadline for the delay proposal is March 17.

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