The latest development in the Department of Labor’s (DOL) effort to include retirement plan advisors as fiduciaries is centered on cost effectiveness. The expanded application of fiduciary duty would reach advisors who manage individual retirement accounts (IRAs).
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Since this would be the first time that IRA advisors would be under the fiduciary umbrella, opponents have insisted on a cost/benefit analysis before the DOL resubmits its proposed rule. The expanded regulatory environment is a result of the 2008 credit crisis, including the discovery of Ponzi schemes promulgated by Bernard Madoff, Alan Stanford, and others.
The securities industry has pushed back on legislation
ranging from the Dodd-Frank Act to the current DOL’s attempt to expand the definition of a fiduciary. Commentary from industry participants greatly toned down edicts of the Dodd-Frank Act. Pressure from the industry also resulted in a withdrawal of the DOL’s original attempt to broaden the scope of fiduciary responsibility.
Opponents have said the expansion to include IRA advisors goes too far and addresses problems that have not yet arisen. The concern is that added costs incurred by the expanded definition would make it difficult for middle-class investors to bear. Proponents say that investors at all asset levels are at risk unless all advisors are required to act in a fiduciary capacity.