Thursday, April 16, 2015

The Department of Labor's Proposed Fiduciary Standard Rule for Retirement Investment Accounts: Putting Clients' Interest First

Much has been written about the Department of Labor's recently proposed fiduciary standard rule for retirement investment accounts.  So much so that we need not use much more ink here.  (And here's a fact sheet summarizing the 120 page proposal.)  Ink-to-date is largely about the politics of the proposal, financial service firms' expected challenges to the proposal, the fierce opposition from those firms to the DOL's similar proposal in 2010, and the chances the proposed rule becomes effective.
According to a recent article in Investment Advisor magazine, financial services firms are the largest source of campaign contributions to federal political candidates and political parties.  And the second largest source of lobbying money.  You can expect opposition to the proposed rule to be well-organized, well-funded, smart, and – as in 2010 - fierce.  And expect the Financial Services Roundtable, the Financial Services Institute, the Securities Industry and Financial Markets Association, and the U.S. Chamber of Commerce to not sit this one out.  In the least.     
The proposed rule, if it becomes effective without watering down, will likely be among the most significant means of lowering retail, net investment costs in perhaps a generation.  The DOL's proposing release states that for IRAs "[t]he underperformance associated with conflicts of interest – in the mutual funds segment alone – could cost IRA investors more than $210 billion over the next 10 years and nearly $500 billion over the next 20 years."
Please stay tuned.

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