401(k) Specialist Issue 2 - 2016 - 5

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FIDUCIARY
DOL Fiduciary Rule to Cost
$4 Billion: FSI
That's billion with a 'B.' A major critic
of the Department of Labor's proposed
fiduciary rule (in its current form) has
undertaken a study of its estimated cost
and, as expected, the results ain't pretty.
Financial Services Institute is an
advocacy organization for independent
broker-dealers, so it's got a big old
gnarly dog in the hunt. It nevertheless
estimates the DOL's proposed rule will
cost the independent financial services
industry and investors nearly $3.9 billion
in total start-up costs to implement the
rule. This is nearly 20 times DOL's preferred
cost estimate. The organization
adds that this amount does not take
into account the cost of investors' lost
access to advice or the ongoing costs of
maintaining compliance with the rule.
The study, " Economic Consequences
of the U.S. Department of Labor's Proposed
New Fiduciary Standard, " suggests
that if the rule is implemented, only high
net-worth investors will be able to access
and afford professional retirement
investment advice.
" This study shows that the DOL's
proposed fiduciary rule would be costly
and burdensome to both the independent
financial services industry and the
investors that rely on the critical advice
they receive, " said FSI President and
CEO Dale Brown. " It also illustrates the
unintended consequences the rule will
have on hard-working Americans trying
to save for retirement, particularly low
and moderate-income investors who
need advice the most. "
LITIGATION
Exclusive: John Bogle's Take on Tibble
Didn't get enough of Tony Robbins or John Bogle is our inaugural
issue? Head over to 401kspecialistmag.com for extended interviews
with each.
Conscience-of-the-industry or cranky old man; however you
view Vanguard founder and investing legend John Bogle (and we
sincerely hope it's the former), his opinion resonates. As always,
he's sounding off in typically feisty fashion about what the Supreme
Court handed down in the high-profile 401(k) fee case.
" I'm really enthusiastic and totally approve, " Bogle tells us. " It
was a unanimous decision that said in no uncertain terms a trustee
has 'a continuing duty-separate and apart from the duty to exercise prudence in selecting
investments at the outset-to monitor, and remove imprudent, trust investments.' "
Of course, it could always be better, and the fact that he's rarely satisfied probably explains
how he found such astronomical success in the first place.
" We have the judicial standard, but now we need legislative language that goes over and
above the Department of Labor's proposal (which I totally support), " he adds. " The fiduciary
standard as currently written and interpreted only applies to retirement advisors and
investors, but it should apply to all advisors and investors, so I want a big expansion of the
definition of fiduciary duty. "
He has particularly strong praise for Justice Stephen Breyer, and of course harsh words
for Edison International.
" Breyer said that if cost and fees aren't an issue in 401(k) plans, then what is? " Boggle
incredulously asks. " Edison International could have used institutional shares for its employees'
investments and didn't, opting instead for the higher-priced retail shares. How is that
not a breach of the fiduciary standard?
INVESTMENTS
IRA Investors Surprisingly Unscathed During Financial Crisis: ICI Report
Reason No. 528 for retirement plan advisors to catch the rollover wave. A report from the
Investment Company Institute finds that with $6 trillion in assets at year-end 2013, traditional
IRA investors had only modest reaction to
financial stress.
Specifically referring to dramatic declines
in stock values between October 2007 and
March 2009, a recession (December 2007
to June 2009), and rising unemployment
rates, Sarah Holden, ICI senior director of
retirement research, and Steven Bass, ICI
associate economist, found that contribution
and rollover activity declined only a bit
in the wake of the financial crisis.
ISSUE 2 2015 | 401kSpecialistmag.com 5

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401(k) Specialist Issue 2 - 2016

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