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CFP Board general counsel expresses support for DOL fiduciary rule

On Behalf of | Mar 22, 2024 | Financial News

The general counsel for the Certified Financial Planner Board of Standards expressed his support for the Department of Labor’s proposed fiduciary rule during an interview with ThinkAdvisor.

Leo Rydzewski discussed various aspects of the plan, which has now been submitted by the DOL to the Office of Management and Budget for review.

The rule would update the definition of an investment advice fiduciary under the Employee Retirement Income Security Act. It would impose the fiduciary standard of federal retirement law on most investment advisors, brokers, and insurance agents making recommendations to retirement plans and plan participants and customers in individual retirement accounts.  The advisors would be required to adhere to high standards of care and loyalty when making their recommendations and avoid recommendations that favor their financial and other interests at the expense of retirement savers.

In his ThinkAdvisor interview Rydzewski said the DOL’s proposal does not need to be revised in any material way and should now be finalized. “The issues that the DOL proposal raises have been discussed and debated for more than a decade,” Rydzewski said. “The time has come for the DOL to issue the final rule.”

He said any CFP professional who provides covered retirement investment advice will have to comply with the DOL’s fiduciary rule.

“The fiduciary duty in CFP Board’s Code of Ethics and Standards of Conduct is like the fiduciary duty set forth in the Department of Labor’s proposed Retirement Security Rule,” said Rydzewski. “CFP Board’s Code and Standards and the DOL’s proposed fiduciary rule both have a duty of care and a duty of loyalty. They also both apply to one-time advice, including rollover recommendations.”

One key difference, he added, is that the CFP Board’s fiduciary duty applies to the individual advisor while the DOL’s fiduciary rule applies to both the advisor and the advisor’s firm.

Rydzewski said the CFP Board’s view is that the DOL’s fiduciary rule will provide meaningful consumer protections and have a significant positive effect on Americans’ retirement security.

Opponents in the financial industry say the rule would significantly increase advisors’ regulatory costs and legal exposure, making advice more expensive and hurting investors with modest assets.  They add that is not necessary due to other regulations, including Regulation Best Interest, and is similar to a 2016 proposal rejected by the U.S. Court of Appeals for the Fifth Circuit.

Rydzewski said the CFP Board disputes each of those arguments.  “Limiting access to ‘sales recommendations’ that are not in the retirement investor’s best interest is a good outcome for retirement savers,” he said. “Requiring financial professionals to provide retirement sales recommendations under a fiduciary standard will result in millions of Americans gaining access to retirement investment advice that is in their best interests. This is great news for less wealthy investors, who have much to lose from retirement investment recommendations that are not in their best interests.”

The fiduciary rule proposal is expected to be finalized this year and take effect on Jan. 1, 2025.

Lewitas Hyman PC represents advisors, brokers and other financial professional in all matters involving the CFP Board, including CFP Board investigations. Headquartered in Chicago, our securities attorneys represent clients nationwide. For more information relating to CFP Board investigations and discipline or other matters, contact Lewitas Hyman at (888) 655-6002 or through our online contact form for a free consultation