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DOL fiduciary rule proposal draws mixed reaction from CFP Board, FPA

On Behalf of | Mar 11, 2024 | Financial News

The Department of Labor’s fiduciary rule proposal has drawn mixed reactions from two different financial planning organizations, InvestmentNews reports.

The Certified Financial Planner Board of Standards (CFP Board) has come out firmly in support of the plan, but the Financial Planning Association (FPA) has expressed reservations about it.

The DOL’s proposal is called the Retirement Security Rule: Definition of an Investment Advice Fiduciary. It would update the definition of an investment advice fiduciary under the Employee Retirement Income Security Act. The rule 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.

The CFP Board said the plan will benefit those saving for retirement by applying a fiduciary standard to those advising them about potential investments.  “CFP Board urges the Department to move forward expeditiously with a final rule that is designed to protect retirement investors,” Leo Rydzewski, CFP Board general counsel, wrote in a letter during the public comment period.

CFP Board CEO Kevin Keller said the board has long advocated for all financial advice to be delivered at a fiduciary standard. “We’ve been consistent for more than a decade in support of the DOL expanding the definition of fiduciary,” said Keller.

On the other hand, the FPA raised concern that the rule would cost its members more for compliance, thus making advice more expensive and less accessible for some investors.  It urged further consideration from the DOL before finalizing the rule.

FPA CEO Patrick Mahoney wrote a comment letter that read in part, “The proposed rule makes a number of changes to the current regulatory framework that will require significantly more time for meaningful analysis and comment, and to understand how this proposal would impact financial planners and retirement savers, alike.”

FPA president Claudia Cypher Kane emphasized that the organization has not taken a firm stance on the proposal yet.

“I wouldn’t say we’re for. I wouldn’t say we’re against. I wouldn’t say we’re ambivalent,” said Kane, an advisor at Beacon Wealth Strategies. “I would just say we’re neutral at this point in time, just hoping for more clarity and hoping for more time.”

Keller stressed that the CFP Board and the FPA have a good relationship, and both have the goal of advancing the financial planning profession. “Eighty-five to 90 percent of the time, we agree on how to do that. This might be one of those times where we might have a little bit different view on how to do that.”

The DOL has said that the fiduciary proposal is necessary because some financial advisers put their interests before their clients’ interests, resulting in reduced returns and higher costs for investors.  The new rule is expected to take effect in early 2025.

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