By John Engler, President, Business Roundtable

 

What if you and your child met with a college counselor and they couldn’t give you specific advice as to which institution might be right for your family, but could only provide general information on the benefits of higher education and the application process? You would be frustrated and confused, right? While this scenario sounds farfetched, it’s what consumers and employees may soon face when it comes to savings and retirement advice.

 

A new rule proposed by the U.S. Department of Labor to change the legal definition of “fiduciary” likely will have far-reaching consequences for millions of Americans.

 

Rules and regulations exist to protect people. But, a regulation can only be effective if it is designed to fit the problem it is meant to solve and implemented in a way that flexibly adapts to changing circumstances.

 

As business leaders, we often hear the complaint that we’re always opposed to regulation – nothing could be further from the truth. In fact, America’s leading companies are particularly concerned about rules and regulations that protect our customers and employees. And on that front, we share concerns with over 100 members of Congress, Democrats and Republicans alike, that the Labor Department’s proposed fiduciary rule could be counterproductive.

 

The point of the proposed rule is to ensure that professional investment advisors put their clients first when they offer investment services or retirement advice. We wholeheartedly agree that customers come first, and financial advisors always have an obligation to put the interests of their clients above all other considerations. At the same time, rules should not deny consumers the information, advice and access to investment products and services they need.

 

Any regulation also must leave ample room for education and outreach activities designed to help individuals save, invest and plan for retirement. Financial education and planning assistance are among the most beneficial services that thousands of employers and financial advisors across the United States offer to their employees and clients. In fact, many people first learn of the benefits of annuities and other guaranteed lifetime income products from their employer or insurance agent.

 

The proposed regulation would unintentionally limit access to investment and savings choices. By discouraging commission-based professional services, for example, the rule would potentially deprive low- and middle-income savers with access to education and retirement planning advice. 

 

The issue with the fiduciary rule is not the intent of the regulation but, rather, its design and scope. Senator Ron Wyden and other U.S. senators have said that the rule’s disclosure requirements “will overwhelm participants and investors.”

 

Senator Wyden and his colleagues point out that the fiduciary rule, as proposed, will, as a practical matter, make it difficult or impossible for human resource professionals to offer specific guidance on retirement or savings; restrict the ability of employers or advisors to offer specific financial education or information; discourage small businesses from sponsoring retirement plans for their employees; and discourage employers of all sizes from offering lifetime income annuities as an option for retirement.

 

The consequences I have listed – and there are more – are all unintended. But they are all serious. The Labor Department needs to go back to the drawing board on this one. Employees and consumers should be protected, but this proposed rule harms their interests more than it helps. Business Roundtable CEOs believe that Americans deserve peace of mind about their retirement savings, and we call on the administration to revisit this rule and get it right.