A national body representing financial advisors is adding its voice to the chorus of concerned stakeholders opposing the DOL’s controversial fiduciary rule proposal.
The National Association of Insurance and Financial Advisors expressed significant concerns over the DOL's proposed rule to enforce a fiduciary-only standard for financial professionals, emphasizing the potential adverse effects on low- and middle-income Americans' access to financial advice.
Kevin Mayeux, CEO of NAIFA, voiced these concerns in discussions with officials from the office of informatio nand regulatory affairs at the White House's Office of Management and Budget Wednesday.
He argued that the proposed rule, aimed at reviving a similar regulation from 2016, could inadvertently push financial professionals toward a fee-for-service model, tilting the playing field against those not in higher income brackets.
“By moving forward with the Proposed Rule, the Office of Information and Regulatory Affairs and the Department of Labor are ignoring … the real-world experience that our members saw first-hand before the 2016 Fiduciary Rule was vacated,” Mayeux said.
The costs of carrying on with the DOL’s fiduciary rule would outweigh the benefits, he contended, especially since current regulations have already enhanced consumer protections significantly.
Since the 2016 rule was vacated, the SEC has introduced Regulation BI, and 45 states have adopted standards for annuity transactions that align with consumers' best interests. Those changes, Mayeux noted, already protect approximately 90 percent of the US population under a heightened standard of care.
He also pointed to NAIFA’s code of ethics, which requires members of the organization to prioritize client interests.
“Our members are Main Street financial professionals who primarily serve and maintain long-standing relationships with individuals, families, and small businesses in their communities,” Mayeux said.
He pointed to a recent survey which indicated that a majority of the association's members serve middle-income families and small businesses, with most clients having an annual household income below $150,000.
Should the DOL rule come to pass, NAIFA says the portion of its membership requiring a $50,000 minimum asset threshold will nearly quadruple, from 13 percent in the survey to 47 percent.
“The 2016 Fiduciary Rule made the brokerage model so expensive and risky that many of our members could no longer serve small accounts,” Mayeux said.
Mayeux also pointed to the potential for the proposed rule to exacerbate the racial wealth gap, particularly affecting Black and Hispanic communities. He referenced studies indicating that previous iterations of such fiduciary rules have led to decreased access to financial advice for lower-income individuals, with a Deloitte study highlighting the impact on small retirement accounts and the Hispanic Leadership Foundation forecasting significant losses for individuals with incomes below $100,000.
“We urge OIRA to discontinue the rulemaking until you address … the Proposed Rule’s significant negative impact on access to financial services professionals,” Mayeux said, vowing that NAIFA will continue to work with policymakers.
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