Fiduciary Proposal Expected in State of the Union; Coalition Steps up Effort

Folks involved with the State of the Union address have indicated that President Obama will speak to the “retirement advice loophole” and the proposal to ensure that all Americans receive investment advice that is in their best interest. This is the administration signal that they are moving forward with the proposed Department of Labor (DOL) fiduciary reg.

A coalition supporting the DOL regulation has launched a grass roots campaign on the issue, saveourretirement.org.

Key Message Points of the “Save Our Retirement Coalition”

The key message of the coalition includes the following:

• Thanks to loopholes in the rules that govern advice about retirement investing, banks, brokers, mutual fund companies and insurance agents are able to portray themselves as trusted advisers while acting as self-interested salespeople. They can recommend investments with higher fees, riskier features and lower returns because they earn more money, even if those investments are not the best choice for you. That means that the financial professionals you turn to for advice can end up costing you many thousands of dollars in lost retirement savings.
• Without ever bothering to check on your financial situation, “advisers” may recommend that you roll over your 401(k) savings into an IRA where in fact the investment expenses you pay are higher than those in your 401(k).
• “Advisers” may recommend that you invest your IRA in a variable annuity that charges high fees, locks up your money for years and provides no tax benefits beyond what your IRA already offers.

The rhetoric clearly indicates that the core of the issue targets IRA rollovers and the insurance industry.

Timeline and Next Steps

The proposed language has yet to be published. We have every reason to believe that the DOL will push for a shortened comment period of 45 days in an effort to rush implementation of the regulation. That means the action and debate start now and will come to a conclusion late in the second or early in the third quarter.

NTSA, and ASPPA, have been engaged on this issue with the DOL, White House and Congress for more than a year and have led a coalition to develop a grass roots campaign that tells the rest of the story. Very shortly, NTSA will reach out to its members and its advocacy committee regarding the proposed regulation and ways to take action. This matter should rise to a senior executive level of the industry.

Chris DeGrassi is the Executive Director of the NTSA.