The proposed Fiduciary Rule and the selling of Fear

I’m a Howard Stern fan since I was about 11. I’m sorry if you’re offended, but I love that brand of humor. One of the main producers of funny materials are guys by the name of Sal & Richard. Aside from their phony calls, they have this bit where they interview people on the street by asking them a question about something that isn’t going to happen such as: how do you feel about Howard Stern signing the national anthem at the Super Bowl or did you hear that the Jews are trying to replace Thanksgiving with Chanukah (in 2013, they occurred at the same time)? Rather than challenge the veracity of the question, the people on the street opine as if the nonsensical event is actually happening and it’s hilarious. If people don’t know whether the event is taking place or not, they will offer an opinion just because they are too embarrassed to admit they know nothing about the question.

I feel that this is the same thing regarding a poll conducted by U.S. Hispanic Chamber of Commerce and Greenwald & Associates, a research firm. The poll claims that if the Department of Labor (DOL) changes the fiduciary rule, small employers will stop sponsoring retirement plans and will suspend employer contributions. It’s absolute nonsense.

The survey included 607 retirement plan decision makers at businesses with up to 500 employees. 30% of the plan sponsors in the poll say it is at least somewhat likely they will eliminate the retirement plans currently available to employees.

More than 40 percent of small businesses without a plan say the regulation would be at least somewhat likely to cause them to charge participants higher fees or not offer matching contributions. What does the fiduciary rule have to do with matching contributions or affect the plan sponsor’s capacity to make one?

Sometimes you will get an answer based on how you answer the question and I sincerely doubt that the poll sufficiently addressed what the new fiduciary rule actually entails.

I think that most plan sponsors don’t understand the proposed rule that would require all retirement plan financial advisors to serve in a fiduciary capacity especially hen I read this in Financial Advisor Magazine:

““The findings presented here show that the DOL expansion of fiduciary status will only impede the ability of small firms to offer their employees retirement-plan accounts, thus hindering American workers from saving for a reliable future,” says Javier Palomarez, president and CEO of the U.S. Hispanic Chamber of Commerce. 

The regulatory change by DOL expanding fiduciary status would limit the retirement plan assistance that some financial professionals can provide to small-business clients, assistance that is valued by small businesses, according to the survey.  The expected change would put limits on conversations with small businesses about how to select and monitor the investment options available under a plan, and how those investments are performing, Greenwald and Associates says.”

Are we talking about the same rule here or was this just a poll using loaded questions meant to lean plan sponsors toward saying the fiduciary rule is a bad idea because it would limit retirement plan assistance? You know the answer. A new fiduciary rule would treat all retirement plan advisors, as fiduciaries and it would eliminate some of the abuse where some advisors push funds for the plan’s investment lineup just because it pays the advisor better. Requiring any retirement plan financial advisor as a fiduciary makes them have skin in the game, which means they would have to be more prudent in their role as an advisor since their duty is to the plan and not to their pocketbook.

This poll is just an attempt at putting fear in trying to defeat any proposed fiduciary role. I’m sure that if I asked the same 607 plan sponsors whether they think the DOL fiduciary rule is bad because it will require plan sponsors to pay a 5% tax to the DOL, they will have a negative poll result as well.

Don’t oppose the fiduciary rule on fake fear, oppose it based on the facts. I support it based on the facts.

Retirement plans are a mess and one way to make them better is a fiduciary rule. Weren’t the same people who think the fiduciary rule is a bad idea the same folks who said people would terminate their plans because of the fee disclosure regulations? I don’t know, but it’s the same selling of fear and we know how it turned out after fee disclosure. Lots of plans are still around.



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