We think Congress got it right. They understood that the nation's preeminent securities regulator, the SEC, needed to write the rule in order to protect retirement savers and preserve investors' choices.
Unfortunately, while the SEC deliberated over how best to write such a rule, the Department of Labor interceded with its own regulatory standard. No matter how well intentioned, the Department's new standard will not work as advertised. Instead of protecting retirement savers, the rule creates regulatory confusion and threatens our ability to adequately serve our clients – the millions of hardworking Americans planning their road to retirement.
Although the politicized debate over the rule has been contentious, the reality is the financial services industry and the federal government agree on the importance of a uniform best interest standard for clients. Rather, it is our paths to reaching this goal that differ substantially. Our concern is that instead of achieving its goal of ensuring financial professionals serve their clients' best interests, the rule actually unnecessarily creates hurdles and legal liabilities that will do more harm than good to individual investors.
If you scratch below the surface of the new Department of Labor rule, you find that it will result in greater costs and confusion for investors, a limitation of products and services, and, in many cases, reduced access to affordable retirement planning advice. In fact, the independent investment research firm Morningstar calculated that the rule could cost investors $13 billion in additional fees. It will also result in tremendous new compliance costs for advisors and open them up to the constant threat of class action lawsuits.
Beyond increasing costs, the rule will dramatically change the relationships between individuals planning for retirement and their advisors, which will adversely affect our ability to serve our clients. By broadly expanding the definition of fiduciary relationship to include discussions between clients and advisors where neither person thinks that advice is being given, the rule will dramatically limit educational conversations key to a clients understanding their investment options.
Further, the rule will place greater compliance burdens and more legal liability on Main Street financial advisors, increasing their costs and forcing them to limit the options and counsel they provide to retirement savers. For small business employees, affordable financial advice will be even harder to find because small plan advisors will face greater compliance requirements and cost increases. Many advisors will stop servicing small plans, which will significantly reduce the retirement savings options available to current small business employees. Clients with multiple accounts subject to multiple regulatory rules will face added confusion.
The Department of Labor's rule not only creates more costs to clients and firms than any real or perceived benefit, but it also contradicts Congress's intent for the SEC to implement a uniform fiduciary standard and seeks to establish an enforcement regime that's administered by the trial bar. To this point, we believe it is time for the courts to determine whether this rule is consistent with the law. Court intervention is necessary in order to protect ordinary retirement savers from bearing the burdensome costs this rule will place on them.
As the legal process takes shape, our path forward will continue to be grounded in putting clients' interests ahead of everything else. We know if we fall short, they will choose another provider, of which there are many. This belief reinforces why we are such ardent supporters of the right uniform best-interest standard of care for all financial advisory professionals.