Wheeler Letter: DOL Rule Will Impact Smaller Investors

NAIFA Trustee John Wheeler sent the following letter to the editors of Crain's Chicago Business in response to an op-ed column run by the publication that criticized Rep. Peter Roskam for his stance of the Department of Labor's fiduciary rule:

To the editors,
 
I have been an insurance and financial advisor for 40 years, and Rep. Peter Roskam recognizes that my colleagues and I provide a critical service for many Illinoisans who are saving and investing for retirement. Perhaps this, despite the cynical opinion piece by Stewart Mather (“Why is Rep. Roskam taking aim at a critical protection for retirees?” Aug. 11), is why Rep. Roskam is working to ensure that the Department of Labor’s fiduciary rule does not increase costs for investors or cut off middle- and lower-income investors from access to advice and services.
 
The impact of the fully implemented DOL rule would be a game changer. LIMRA, a highly regarded international research organization, estimates that 4 million middle-market households in the United States will lose access to retirement advice under the rule. A survey of National Association of Insurance and Financial Advisors members found that 91 percent have reduced their product offerings or expect to do so because of the DOL. Nine out of ten anticipate that clients will pay more for advice and services. Research sponsored by the Securities Industry and Financial Markets Association and conducted by Deloitte® confirms these results. They found that 95% of financial institutions studied have made changes to the products available to retirement investors, including limiting or eliminating asset classes offered and certain share classes or product structures. And 53% reported limiting or eliminating access to advised brokerage for retirement investors, impacting 10.2 million accounts.  
 
Mr. Mather dismisses these concerns by pointing to the availability of “advisers who leverage technology.” In other words, lower and middle-income investors can use so-called “roboadvisors,” while personalized, face-to-face advice and counseling services would be privileges reserved for wealthier clients who can afford the increased costs.
 
Mr. Mather’s firm offers fee-based services to wealthy clients and requires a minimum account balance of $1,000,000. So it is perhaps not surprising he would advocate that particular compensation model, which is favored by the DOL fiduciary rule. A recent Wall Street Journal article reports that many financial firms are enjoying increased profits, because the DOL rule has prompted them to move many clients who formerly paid commissions into more lucrative fee-based accounts. For some consumers, these fee-based accounts can cost twice as much as they were paying in commission-based accounts, according to the Journal. Furthermore, research commissioned by the Financial Services Roundtable found that counter to the claim by the CFP Board of Standards that the rule is workable for their members, only 10 percent of CFPs report that the rule is helping them to serve their clients best interests.
 
I believe the government should not regulate away the ability of consumers to choose how they would like to compensate advisors. Often times buy and hold investors pay less and receive more value from a commission-based compensation model than a fee-based model. According to the think-tank American Action Forum, retail investors are likely to see their costs increased by 73% to 196% due to a mass shift towards fee-based accounts. It’s no wonder that Mr. Mather is a fan of the Rule.
 
As a financial professional, I wish the DOL rule simply required me to work in the best interests of my clients. I have done so unflinchingly my entire career. But the fact is, the rule places undue burdens and costs on advisors and their clients that in many cases end up harming the people the DOL aims to protect.
 
John W. Wheeler, Jr. CFP, CLU, ChFC, CRPC, LUTCF

  • Posted August 24, 2017 IN
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Comments
Sneha Shah
Really a nice and informative article. Thanks for sharing
8/30/2017 2:14:44 PM