April 18, 2017

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FSR Urges DoL to Protect Retirement Savers, Comply with President’s Memorandum

Research shows fiduciary rule may increase consumer costs by $46.6 billion.

FSR Urges DoL to Protect Retirement Savers, Comply with President’s Memorandum
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FSR Urges DoL to Protect Retirement Savers, Comply with President’s Memorandum

Research shows rule may increase consumer costs by $46.6 billion

WASHINGTON, D.C. – The Financial Services Roundtable (FSR) today urged the Department of Labor (DoL) to review new studies and marketplace developments as it determines next steps for the fiduciary rule. Research shows that American savers are already facing limited choices, reduced service models and product availability, and increased cost as they save for retirement.

“FSR strongly supports a ‘best interest standard’ but believes it should be implemented without undue complexity or cost so it does not become more difficult for Americans to save for retirement and build wealth,” said FSR CEO Tim Pawlenty.

On February 3, 2017, President Trump signed a memorandum instructing the (acting) Secretary of Labor to examine the fiduciary rule to determine whether it may adversely affect the ability of investors to gain access to retirement information and financial advice. According to research published last week by the American Action Forum (AAF), the fiduciary rule “has the potential to increase consumer costs by $46.6 billion, or $813 annually per account, in addition to the $1500 in duplicative fees for retirement savers that have already paid a fee on their commission-based accounts.” In addition, AAF research revealed: “based on a minimum balance requirement of $30,000, the rule could force 28 million Americans out of managed retirement accounts completely. Even with a minimum account balance of $5,000, over 13 million would lose access to managed retirement accounts”.

The Department’s own analysis previously predicted investors would be able to obtain advice at the same price under the final rule and exemptions as absent the rule. Examples, such as the American Action Forum research, show that is clearly not the case.

In its letter, FSR notes the varying ways firms have already responded with changes to service models and product availability, including:  (a) moving clients to fee-based accounts; (b) eliminating commission-based IRAs; (c) raising investment minimums for commission-based IRAs; (d) eliminating variable annuity products; and (e) excluding certain products from commission-based IRAs (e.g., annuities, mutual funds, and exchange-traded funds).

“In light of the adverse impacts on Retirement Investors, it makes no sense to implement a rule that could be rescinded or at least materially revised in a mere matter of months. We urge the Department to reconsider this premature determination, and postpone the applicability date of the Final Rule until its consequences and effects can be, and are, thoroughly and fully examined afresh in accordance with the Presidential Memorandum’s criteria,” FSR wrote.

To read FSR’s full letter to the DoL click here.

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About The Author

The Financial Services Roundtable represents the largest integrated financial services companies providing banking, insurance, payment and investment products and services to the American consumer. Member companies participate through the Chief Executive Officer and other senior executives nominated by the CEO. FSR member companies provide fuel for America’s economic engine, accounting for $92.7 trillion in managed assets, $1.2 trillion in revenue, and 2.3 million jobs.

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