Compliance

Adviser Advocacy Group Backs Fiduciary Rule

Filing a “friend of the court” brief in support of the DOL’s new fiduciary rule, the Financial Planning Coalition argues advisers will be able to adapt successfully to the new conflict of interest restrictions. 

By John Manganaro editors@plansponsor.com | August 26, 2016

The Financial Planning Coalition, comprising the Certified Financial Planner Board of Standards, Inc. (CFP Board), the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA), filed an amicus brief in the U.S. District Court for the Northern District of Texas, supporting the Department of Labor’s (DOL) fiduciary rule and opposing efforts to stop the rule from taking effect.

In its amicus brief, the coalition specifically notes their “strong opposition to the current attempt to stop the rule through a court challenge.” The coalition submits that the experiences of its professionals and their clients show that a broadly applicable fiduciary standard represents a win-win for the industry and the public. In short, the coalition argues that the business success of its members, who are generally held to very strict standards of conduct in terms of conflicts of interest, prove in advance that the stricter fiduciary paradigm will not in itself stifle innovation or quality service. 

“The current regulatory framework … fails to align advisers’ interests with investors’ by leaving open significant loopholes that allow for the sale of financial products that may not be in the best interests of the investor,” the coalition writes. “The Department of Labor’s strengthened fiduciary rule is therefore necessary and appropriate to protect the public.”

The brief centers around three critical points of argument. First, the coalition argues, investors currently suffer from a lack of complete, truthful disclosures, and this is having a measurable negative effect on retirement outcomes. Second, “empirical research and the coalition’s own practical experience confirm that middle income investors will retain ready access to professional financial advice under a fiduciary standard of conduct.” And finally, based on CFP professionals’ experience under internal standards similar to those required by the Best Interest Contract Exemption, the coalition argues the rule provides “a workable solution to allow for advisers to receive transaction-based compensation while providing advice that is in the best interests of the client.”

“The coalition’s experience—involving nearly 80,000 financial-planning professionals of all business models and sizes—offers a reality that starkly contrasts with the speculation from the rule’s opponents, and provides the court with a unique perspective on the issues in this case,” the amicus brief states. “Thousands of CFP professionals and FPA and NAPFA members across the country currently provide fiduciary-level services to investors with business models requiring no or very low minimum assets under management.”

The full brief, which offers considerable detail on the success of advisers working under the auspices of the Financial Planning Coalition, is available in full online

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