SIFMA Releases Study in Response to White House Report on DOL Retirement Regulation

Release Date: March 16, 2015
Contact: Carol Danko, 202.962.7390, [email protected]      

 SIFMA Releases Study in Response to White House Report on DOL Retirement Regulation

Washington, DC, March 16, 2015 – SIFMA today released a new study entitled, Review of the White House Report Titled ‘The Effects of Conflicted Investment Advice on Retirement Savings’ from the National Economic Research Associates (NERA), which identifies flaws in figures cited in the White House’s Council of Economic Advisors Report and frequently reiterated by supporters of a proposed retirement regulation from the Department of Labor. 

Below are some key findings from the study:

The Administration’s Estimated Cost To Retirees Under Current Regulations Is Nowhere In Academic Literature. “The White House Report posits that US investors, in the aggregate, bear large costs because of the services provided by brokers who act in their own best interests, rather than the investors’. While the Report points to academic literature to support these aggregate cost estimates …. the estimates are not directly found in the academic literature. This approach is flawed in multiple ways.” (pg. i)

The Administration Ignores The Negative Consequences Of Similar Retirement Regulations In The UK. “A sizeable number of low-balance clients lost their advisor. Europe Economics finds that just in the first three months of 2014 about 310,000 clients stopped being served by their brokers because their wealth was too small for the broker to advise profitably.
An additional 60,000 investors were not accepted as new clients by brokers for the same reason (low-balance) over the same three months.” (pg. 3)

The Administration Gives Short Shrift To The Benefits Brokers Provide And The Possibility Consumers Seek These Benefits In Light Of Costs. “The Report uses claims that brokers underperform, but Chalmers and Reuter (2014) does not provide any evidence that consumers that are currently using brokers would do as well as self-directed consumers if they were left to their own devices; if anything Chalmers and Reuter (2014) can be seen as suggesting the opposite.” (pg 9)…“The paper’s findings may thus be taken in the opposite spirit as that suggest by the Report – brokers and financial advisors might in fact be able to ameliorate the problem of investor mis-timing by explaining to individual investors that they should trade less frequently.” (pg 11).

Read the full study here

See also: SIFMA’s DOL Fiduciary Resource Center.