Garrett again battles for DOL rule 

The last time Sheryl Garrett attended a White House rollout of a proposal to raise investment advice standards for rollovers, she became one of the stars of the show.  

When President Barack Obama announced the Department of Labor’s proposal in 2015, Garrett was in the crowd at an auditorium at AARP headquarters in downtown Washington. Obama cited Garrett when he highlighted examples she had provided to the White House of investors who had been harmed by bad recommendations to transfer funds from a company retirement plan to an individual retirement account.  

“Once he mentioned my name, I didn’t remember anything after that,” said Garrett, founder of the Garrett Planning Network. “It’s surreal now. It was extremely surreal then.”  

The Obama administration’s DOL fiduciary rule was vacated by a federal appeals court in 2018. When the Biden administration released a similar regulation on Oct. 31 at the White House, Garrett was again in the audience.  

It wasn’t quite as exciting a moment for Garrett this time. President Biden didn’t call out her name. But she left the event with a bounce in her step because she felt as if this time around, the DOL proposal – known as the retirement security rule – would become a final rule that survives.  

“In general, folks were elated to see that we’re not talking about years or decades before we would see fiduciary advice for all,” Garrett said of the White House audience, which mostly comprised investor advocates. “It’s coming just in the nick of time.”  

Under the DOL proposal, most financial advice to retirement savers – including a one-time rollover recommendation – would be held to the fiduciary standard in federal retirement law if the investor is working with a “trusted advisor,” regardless of whether that’s an investment advisor, broker, or insurance professional.  

Financial advisors would have to give advice that is in the investor’s best interests, avoid misleading statements, and charge reasonable fees, among other requirements. The proposal is designed to curb advisor conflicts of interest that lead to “junk fees” that are eroding Americans’ nest eggs, the Biden administration asserts.  

Financial industry resistance to the Biden DOL rule is shaping up to be just as fierce as it was to the Obama rule. Industry opponents of the Obama rule filed the lawsuit that led to the Fifth Circuit Court of Appeals’ decision to kill the regulation.  

Critics of the latest iteration of the DOL rule say that it will sharply increase regulatory costs and legal exposure for brokers and insurance agents, who will be held to the fiduciary standard required by the Employee Retirement Income Security Act.  

A staunch fiduciary advocate, Garrett is ready to return to the battle over applying the standard to retirement accounts and plans.  

“I’m delighted that the concept of fiduciary did not get wiped off the plate,” Garrett said. “It’s what retirement savers need and expect when they seek advice on what they can and should do next.”  

She’s particularly enthusiastic about the reach of the DOL proposal, which encompasses insurance investment products that aren’t securities, such as fixed index annuities, and independent insurance agents who sell them.  

“The insurance industry needs to be held to the same standard as a registered investment advisor is held to,” Garrett said. “There is a huge [regulatory] gap. The rollover itself is not considered a fiduciary act, and it should be. It’s virtually an irrevocable decision.”  

Trade associations representing brokerage and insurance firms are arguing that under the DOL proposal, their members would decline to work with savers with modest retirement assets because of the costs associated with fiduciary requirements.  

“I say, figure it out,” Garrett said. “Your less-wealthy clients should not be subsidizing the wealthy people. If you can’t make money serving the middle market because you have to sell them more expensive products, you should get out of the market. Stop ripping them off.”  

The nearly 250 advisors in Garrett’s network are fee-only fiduciaries who don’t receive commissions or any other compensation based on the sale of a financial product or service. They are also all certified financial planners. The CFP designation has its own fiduciary requirements.  

Advisors in the network charge hourly fees, an approach that Garrett says promotes acting in a client’s best interests better than assessing a fee based on assets under management.  

“Money has to move for advisors to be paid most of the time,” she said. “So by charging for time, money doesn’t have to move. Writing a check for your services is painful. Taking your fee quarterly out of the investment account is almost invisible. Or, if it comes out of an annuity, the client doesn’t know it.”  

Garrett, 61, is making plans to step back from the leadership of the network she founded in 2000. “Version 2.0,” she said, will be “member-driven and member-led.”

Eileen Freiburger, who joined the network in 2001, came out of retirement in 2021 to become its managing director.  

Hearth and Home 

Sheryl Garrett began her own retirement planning 15 years ago when she decided to move to Eureka Springs, Arkansas. Nestled in the Ozark Mountains in the northwest part of the state, the area offered beauty, peace, and the opportunity to grow plants and fruit sustainably throughout the year for Garrett and her spouse, who passed away two years ago. Garrett has a mini-orchard and a greenhouse on her grounds, where she lives with her teenage daughter. “We like feeling like we’re out in the wilderness,” Garrett said, even though they’re only two miles from the center of town.