The Department of Labor launched public hearings August 10 to hear testimony on its proposed rule requiring financial advisors who offer retirement advice to follow a fiduciary standard when recommending individual retirement accounts (IRAs).
The expanded definition would set a standard of putting the client’s best interest first for any financial professional providing advice on retirement savings vehicles, including IRAs. The proposal, introduced in April, solicited more than 900 comments and more than a dozen petitions, which were posted to the DOL’s public comment page. Public hearings on the rule began Monday, August 10, in Washington, D.C., and will conclude August 13.
The rule could change how advisors offer advice and charge fees in their IRA business. The proposed rule broadens the definition of fiduciary to “any individual receiving compensation for providing advice that is individualized or specifically directed to a particular plan sponsor (e.g., an employer with a retirement plan), plan participant, or IRA owner for consideration in making a retirement investment decision is a fiduciary. Such decisions can include, but are not limited to, what assets to purchase or sell and whether to roll over from an employer-based plan to an IRA.”
In response to previous industry concern on prohibiting commissions and revenue sharing, the proposed rule creates a new exemption — a “best interest contract exemption” that would allow firms and advisors to receive commission and revenue-sharing payments.
The proposal has support from the White House. Earlier this year, President Obama called for change in the delivery of retirement advice.
The public comment period, which was extended through July 22, drew a mixed reaction from industry and business leaders, and other stakeholders.
Securities and Exchange Commission member Daniel Gallagher Jr. commented on the rule in a letter to the DOL. In addition, a bipartisan group of 20 members of the House of Representatives sent a letter to DOL Secretary Thomas Perez asking for a review of all of the comments and recommending a “re-proposal of the rule.”
Transcripts from the public hearing will be published by the DOL and an additional public comment period will be announced for written submissions.