Refine the Rules: 3 Ways the DOL Can Help Investors and Our Industry

The U.S. Department of Labor (DOL) raised a lightning rod in the form of its newly drafted rules for fiduciaries. And none too soon — turbulence in our retirement system has been brewing for decades.

The issue of retirement savings is now a social and financial imperative, both in the United States and globally. Contributing forces include major demographic changes, a global financial crisis and longstanding demand for accessible, open-architecture investment solutions.

The DOL’s latest rulemaking effort is well-intentioned and directionally correct. It’s a brave-hearted step toward improving fiduciary standards that can benefit investors and industry professionals alike. But (you knew it was coming) some precise refinements are needed if these rules are to be enduring and effective in helping investors and the investment professionals who serve them.

Here are three key recommendations for refinements we think may help – a shorthand version of the comments I provided to the DOL Committee during an Aug 12 hearing and in a subsequent comment letter to the DOL on Sept 24:

  • Focus the rules more precisely where they can do the most good (and avoid creating the most harm). The rules were intended to improve advice to individuals and small plans and shake “bad actors” out of the system, yet the rules were proposed to change long-standing regulations that work for large plans and providers to those plans. The needs and risk parameters of individuals and smaller retirement plans are vastly different from those of larger institutions, and past regulatory codes have reflected this variance. Sharper focus allows the rules to be better tailored for those who provide and receive retail investment services and do so without “chilling” extremely helpful practices such as investment education that help introduce individuals to retirement savings.
  • Recognize that individual investors themselves come with a wide range of goals, aptitudes, sophistication and risk thresholds. A carve-out for “qualified” or “accredited” investors would help here. It’s a prudent approach that has already worked well in enabling more sophisticated investors while safeguarding those with more basic needs. Again, this helps focus the fiduciary standards where the DOL and the White House believe they are most needed (smaller investors and plans), while allowing professionals to effectively serve the larger, more complex clients without unnecessary regulation.
  • Clear the way for multiple employer plans (MEPs), including “open” MEPs, to enable unrelated companies to share a common retirement plan platform. This will help workers at smaller companies gain better access to retirement plans. It also minimizes costs and complexities for smaller companies that might not otherwise offer a retirement plan benefit. My colleague Bob Collie recently reported that the concept of MEPs is favored a notion among a majority of our institutional clients.

Refining the DOL rules will help improve fiduciary protocols for all investors while enabling advisors and plan sponsors to be more effective in their work. In our business, we have continually supported advisors and retirement plan sponsors that are committed to putting the interests of investors and plan participants atop their list of priorities.

We urge the DOL to embrace a similar stance as it takes this important step in addressing our retirement savings imperative.


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