A Labor Department official told financial industry professionals on Tuesday that the agency would consider adjustments to a new investment advice rule for retirement accounts if problems arise during implementation.
“We need to have the courage to make changes and to be responsive as problems emerge,” said Timothy Hauser, a DOL deputy assistant secretary, at an Investment Company Institute conference in Washington. “We have every intent to do so.”
Paul Schott Stevens, ICI president and chief executive took solace in those words.
“We all ought to monitor developments very carefully,” Mr. Stevens said in an interview on the sidelines of the conference. “We're very glad of the comment he made that they intend to do that and if they have to trim their sails as a result of unintended consequences, they're prepared to do that.”
(More: Coverage of the DOL fiduciary rule from every angle)
Mr. Hauser told reporters after his session that the DOL is not contemplating changing the compliance deadlines though. By next April, advisers must act as fiduciaries and by January 2018, the full conditions of the rule must be met.
“Right now, the plan is for everyone to get in compliance on time,” Mr. Hauser said.
In doing so, he wants to hear from the industry about compliance challenges. Mr. Hauser got an earful, or at least a stack of question cards, from the audience at the ICI event.
“We'd rather give advice out early rather than have you build entire systems only to have us say, 'No, we don't think that it complies,'” he said.
Mr. Hauser expressed confidence in the industry's ability to adapt to and even thrive under the regulation, which requires financial advisers to act in the best interests of their customers in 401(k), individual retirement accounts and other qualified accounts.
“My belief is that there is enough creativity, there is enough competitive drive that this industry is going to be able to continue to deliver advice to their customers in a competitive and effective way,” Mr. Hauser said.
He added: “Merely being required to give advice that's in the customer's best interest, that isn't overpriced and that's honest is not an impediment to achieving those objectives.”
ICI, which represents the mutual fund sector, remains wary of the measure and its potential impact on commission compensation for advice.
“This market is very complicated; there are an enormous number of moving parts to it,” Mr. Stevens said. “We've now entered into a completely unprecedented new regime for the provision of retirement advice that also implicates how retail investors are going to get advice. I don't think anybody knows exactly what is going to happen.”
The proposed rule was the target of withering criticism from the industry, which asserted it was too complex and would make advice sharply more expensive to give and receive.
In the five weeks
since the final rule was released, the industry has been fairly quiet about it, although most trade associations did back a
recent congressional resolution to kill the regulation.
The agency
streamlined the rule before releasing it in final form in order to answer criticisms about operational difficulties it posed. But Mr. Hauser said the heart of the rule — providing an enforceable best-interests' standard — hasn't been diminished.
