Late last week a Federal court stood up for the free market in financial services by ruling that the Department of Labor (DOL) overstepped its decision-making authority when it wrote the 2015 fiduciary rule. Finalized during the Obama administration, the rule requires investment advisors to comply to a strict fiduciary standard when dealing with clients. While supposedly motivated out of consumers’ welfare, in reality the rule has proven quite impractical and costly not just for investment firms, but for Americans with lower account balances as well.
NTU has previously written that the fiduciary rule will not only reduce access to investment advice for 7 million IRA holders, but it will also increase annual fees by over $800 per account. The rule will also force many investment firms to move away from the conventional commission-based system to a fee-based system so as to avoid any possible non-compliance. Besides the fact that the majority of consumers view the fee-based model less favorably, many firms were already reacting to the rule by choosing to deal only with big money investors, pricing many lower and middle-income investors out of the market. In practice, this rule is doing far more harm than good to the people it was supposed to protect.
While this ruling doesn’t quite mark the end of the fiduciary rule as DOL could still take the case to the Supreme Court, it is still a significant step forward. But instead of continuing court battles, DOL should scrap the rule entirely and and stand down so Congress can pass a legislative solution that balances consumer protection with the interests of investors. That’s why we endorsed Congresswoman Ann Wagner’s bill, the Protecting Advice for Small Savers (PASS) Act, because it creates a common-sense standard instead of a top-down approach taken by bureaucrats at DOL.
Bottom line, it is essential that government support policies that protect access and affordability to investment advice for all Americans. As taxpayers, all of us win from policies that equip us to invest in our future prosperity and save for a dignified retirement that is reliant on shaky government entitlement programs.