TD's Bradley: Rule to protect investors could cost them their IRAs

The proposal the Department of Labor is considering to expand who is considered a fiduciary within retirement plans could end up costing investors their self-directed IRAs, according to Tom Bradley, TD Ameritrade Institutional's chief executive. As the rule was proposed, a firm such as TD Ameritrade would become a fiduciary to the hundreds of thousands of self-directed individual retirement accounts it oversees, accounts that now allow investors to make $9 equity trades. As a fiduciary, the firm could not charge a commission, but instead would have to assess a flat fee or use an automated computerized system of advice. If the firm had to consider whether each trade within the IRA was in the best interest of that client, the accounts would become more expensive, he said. The proposal "goes, ironically, a little bit too far because it could kill the ability [or] individuals to self-direct an IRA account," said Mr. Bradley, speaking at the annual National Association of Personal Financial Advisors conference in Salt Lake City this morning. "The consequences of the rule proposal need to be addressed." He said the Department of Labor is "absolutely getting close to finalizing the rule," which was proposed in October 2010 and has attracted about 200 comment letters. DOL spokesman David Roberts did not return a call inquiring about the department's timing for the rules. The department's move to expand the definition of fiduciary would do away with the five-part test now being used that some say makes it too easy for fund advisers to escape fiduciary requirements. Mr. Bradley isn't the only person worried that investors won't like the consequences of the rule as proposed. In a letter to the DOL and other agencies earlier this month, the New Democrat Coalition asked the labor agency to reconsider the proposal, asserting it would limit access to investment education and information. “This would result in worse investment decisions by participants and would, in turn, increase the costs of investment products, services and advice that are absolutely critical parts of a sound investment strategy for consumers,” the group of 29 centrist Democrats wrote.