Washington, DC, August 10, 2017 – SIFMA submitted a comment letter and study to the Department of Labor (DOL) in response to the Department’s July 6, 2017 “Request for Information Regarding the Fiduciary Rule and Prohibited Transaction Exemptions.” SIFMA provides the DOL with new data on the rule’s potentially negative impact on retirement savers, reiterates the need to delay the January 1, 2018 applicability date and stresses the need for a workable standard to protect investors.

“Retirement savers should be able to choose the type of investment products and services they want when saving for their future,” said Kenneth E. Bentsen, Jr., SIFMA president and CEO. “Unfortunately, the DOL’s Rule has made retirement saving harder for many Americans, resulting in the government in effect dictating what products and services they can choose. We welcome the opportunity to provide recommendations on improving the rule bolstered by new evidence of the Rule’s harmful impact. We continue to support the Securities and Exchange Commission acting to establish a best interest standard and believe that the DOL’s misguided rule is not only harmful to investors, but also inconsistent with the administration’s stated priorities and must be rescinded or substantially revised.”

In the comment letter, SIFMA provides the following to assist in the DOL’s review of the Rule: 1) data detailing the negative impact to investors as firms move to implement the Rule and Exemptions; 2) An explanation of why it is unnecessary to create a new private right of action to change the standard of conduct in the financial services sector; 3) Changes to the regulatory language needed to help make this Rule work for retirement savers; 4) Comments regarding the Exemptions; and 5) A proposed new principles-based exemption that protects investors and provides certainty to service providers seeking to comply with the Rule’s intent.

SIFMA also stresses the need to delay the January 1, 2018 applicability date, at least until the DOL can complete a comprehensive review of the Rule and undertake revisions, if necessary, as directed by President Trump in a February 3, 2017 memorandum. If the review concludes that the Rule has had harmful effects on investors and the market, revisions cannot be completed in time.

Study on the Rule’s Impact:

SIFMA commissioned Deloitte & Touche LLP to perform a study of a cross-section of SIFMA members to analyze how financial institutions responded to the Fiduciary Rule and the potential impact of those changes on retirement savers and the institutions themselves. The 21 financial institutions who participated in the study represent 43% of US financial advisors and 27% of the retirement savings assets in the market.

The study found that access to brokerage advice services has been eliminated or limited by many financial institutions as part of their approach for complying with the Rule, and that retirement assets have shifted to fee-based or advisory programs because of those limitations.

• 53% of study participants reported limiting or eliminating access to advices brokerage for retirement accounts, impacting an estimated 10.2 million accounts and $900 billion AUM.
• 95% of study participants indicated that they had reduced access to or choices within the products offered to retirement savers as a result of efforts to comply with the Rule. Products affected include mutual funds, annuities, structured products, fixed income, private offerings, and more, impacting approximately 28.1 million accounts.
• Survey participants’ indicated that they spent approximately $595 million preparing for the initial June 9, 2017 deadline and expect to spend over $200 million more before the end of 2017. Multiplied industry-wide, that equates to a projected spend in excess of $4.7 billion in start-up costs relating to the Rule, far-exceeding the DOL’s 2016 estimated start-up costs for broker-dealers of $2 billion to $3 billion. The ongoing costs to comply are estimated at over $700 million annually.

The full text of the letter can be found here.
The Deloitte Study can be found here.

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SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $20 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.