The PBS Frontline story on “The Retirement Gamble” raises important points about the state of Americans’ retirement planning at a time when company-provided pensions are a thing of the past.
Among a number of issues raised about the usage of 401ks and IRAs in retirement planning, the program also cites the Department of Labor’s efforts to develop a fiduciary rule for advisors who serve retirement plans and individual retirement arrangements (IRAs). NAIFA opposed the fiduciary rule the DOL originally proposed, which would have been harmful to people trying to save for retirement and deprive them of access to products, services and advice.
Absent from the Frontline program is the potentially negative impact a new proposed DOL rule could have on consumers. If advisors are precluded from offering commission-based products, consumer choices will be limited, and many may not be able to afford advisor fees. Additionally, if advisors’ liability and costs increase, advisors may not be able to afford to work with small accounts or IRA holders. Middle-market consumers, who arguably have the greatest need for help and advice as they plan for retirement, may find access to advisors both expensive and difficult. Small employers may decide to scale back their employee benefits plans rather than pay the increased costs.
NAIFA's concern is not isolated, as there have been numerous bipartisan Congressional letters expressing concern, including the most recent effort by the members of the Congressional Black Caucus. They wrote: "We maintain concerns that if the re-proposal reflects the department's initial fiduciary proposal, it could disparately impact retirement savers and investment representatives in the African-American community." NAIFA concurs that families in low- to middle-income communities could be disparately impacted.
Middle-market investors must continue to have access to affordable professional investment guidance for their retirement planning. Any new proposal should adequately protect consumer access to retirement savings products and services while ensuring that consumers receive investment advice of the highest quality and reliability.
As NAIFA indicated in previously submitted comments to the Department, any DOL proposal should:
- Not extend ERISA-based regulation to individual retirement arrangements (IRAs),
- Include a robust seller’s exception to ensure retirement investors do not lose access to investment recommendations from broker-dealers and their representatives, and
- Not contradict the provisions of Dodd-Frank specifying that receipt of commissions and sales of proprietary products are not intrinsically fiduciary violations.