In the following op-ed, originally published in U.S. News, SIFMA’s President and CEO writes that a new proposal being drafted by the Department of Labor (DOL) could have an unintended negative impact that would make it harder for Americans to meet their retirement goals.

I am writing in response to Jim Lardner’s May 6, 2014 op-ed entitled “When Salespeople Call Themselves Advisors” in order to address some of the misconceptions and inaccuracies regarding the industry’s position.

When helping Americans save for retirement, investment professionals work hard every day to serve in their client’s best interest. In return, their clients trust them to act on their behalf in a way that is suitable for their individual retirement needs. Each day, millions of Americans rely on broker-dealers to help them save for their future. Studies have shown that investors who work with an investment professional save more and are better prepared for retirement.

We think everyone agrees that helping Americans get ready for retirement is critical. Unfortunately, a new proposal being drafted by the Department of Labor could have an unintended negative impact that would make it harder for Americans to meet their retirement goals. The proposal is intended to protect investors, but in reality, it could cause a wide range of investors, from hard-working families to small business owners to seniors, to pay higher fees with fewer options and less – or no – access to investment guidance at the time they need it most.

Today, retirement investors can choose the type of investment professionals and services they want and the manner in which they prefer to pay for these services. Those with greater needs may choose to work with an investment adviser who provides individualized investment advice for an asset-based advisory fee, hourly fee or annual retainer.

However, most investors, particularly middle-class Americans and small business owners, choose to work with registered broker-dealers, who are paid commissions when they buy or sell investments and who provide investment education and guidance as part of those brokerage services. In fact, 95 percent of households saving for retirement have commission-based accounts. This is often a much more affordable option for those with smaller accounts or for those who trade less frequently.

If the DOL moves forward with its proposal, it could deprive these investors of the option to use a broker-dealer and a commission-based account. Investors will either be left to go it alone without the investment guidance they once had or they will have to open an advisory account – a move that could force them to pay more for services they don’t want or need.

We understand that the DOL’s intentions are to ensure that broker-dealers act in their client’s best interest, yet we believe their concern in this context is misplaced. Broker-dealers act in their client’s best interests because they know their clients expect them to do so and clients can always take their business elsewhere. Changing the law in a way that could do significant harm to the people the DOL wants to protect is not the answer.

Broker-dealers are held to high industry standards. They are subject to extensive regulation and oversight by the Securities and Exchange Commission, the Financial Industry Regulatory Authority and state securities regulators. This oversight includes rigorous registration, licensing, testing and continuing education requirements, as well as publicly available disclosures about the broker’s background and conduct.

SIFMA has long-supported a uniform fiduciary standard of conduct that would hold both broker-dealers and investment advisers to the same robust SEC standard when providing personalized advice to their clients. In fact, the SEC is currently reviewing the standard of care that brokers and investment advisers provide their customers, and it has been authorized by Congress to take action as needed. We support this approach.

However, we remain concerned that the DOL is moving forward with a proposal that would lead to conflicting standards that would make it difficult for most investors to get the help they need.

We share the DOL’s goal to protect middle-class Americans saving for retirement. However, the reality is that their proposal could do more harm than good to the very investors they are seeking to protect.

Kenneth E. Bentsen, Jr.
President and CEO
SIFMA