News & Updates

April 5, 2016



Arthur Levitt, Jr., chairman of the Securities and Exchange Commission from 1993 to 2001:

In this videotaped interview, Levitt explains why the DOL rule is needed, how it will help savers of modest means, and why the SEC doesn’t need to act first.

Calls the lack of congressional support for the DOL fiduciary rule a “national disgrace”

Says the arguments that America’s least wealthy investors stand to be cut off from Wall Street’s wares are bogus. “Brokers are among the most resilient, resourceful business people in America,” he said in an interview. The notion that the DOL’s rule would motivate the industry to dump low-balance customers “is pure fantasy,” he said. investors.html

John Bogle, founder and retired CEO of The Vanguard Group.

On June 4, in a speech in Philadelphia at a CFA Society gathering, Jack Bogle, the founder of the $3 trillion Vanguard Group, declared that “’putting investors first’ is at last gaining momentum in the evolution of our nation’s financial system.”

He asked the audience, “How many members of our profession would want to operate under the mantra: ‘We put our clients’ interests second, but it’s close?’” Yet, he said, “the reality of the U.S. investment system is that it has rarely been dominated by” the fiduciary principle.

Bogle told those assembled that he has been an advocate for “a federal standard of fiduciary duty, the duty of everyone who touches ‘other people’s money’ (OPM) to place the interests of [their] clients above [their] own interests” and that he supports the proposed Department of Labor broker fiduciary duty standard.

Everybody’s big focus is that we have to save more,” said John C. Bogle, founder and former chief executive of Vanguard, the investment management colossus. “A greater part of the problem is the failure of investors to earn their fair share of market returns.” His observation suggests a different policy prescription: shoring up Americans’ retirement requires, first of all, aligning the interests of investment advisers and their clients. but-one-change-could-help.html?_r=0

Leo Hindery, Jr., Co-chair of the Task Force on Jobs Creation, founder of Jobs First 2012, and a member of the Council on Foreign Relations. He is the former CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. (TCI) and Liberty Media:

Earlier this year, the Department of Labor proposed a new “Best Interest Rule” that’s so common sense most Americans believe it’s already in place. Very simply, it requires brokers and other financial advisers to put the best interests of their clients’ savings for retirement first, before their own bottom line. It closes a 40 year-old legal loophole that has been exploited by some in the financial advisory industry for decades, allowing them to rake in billions of dollars a year in commissions by recommending investments that drain away their clients’ hard-earned savings through these commissions and low investment returns.

Supporting this Department of Labor initiative should be a no-brainer, but unfortunately some in the financial services industry are using the same tired tactics that have caused so many Americans to lose faith in business leadership over the years. Many bankers, broker-dealers, and other members of the industry have issued dire warnings that this modest and sensible rule will actually hurt low and middle income savers. This is the same tactic they’ve been using since the inception of financial regulation in the United States, including reforms enacted in the 1930s to prevent another Great Depression.

After their decades of hard work, Americans deserve to retire with dignity and security. The proposed Department of Labor Best Interest Rule will help them do just that if we can just get it over the finish line and beat back selfish opposition coming from within parts of the financial services industry.


The main argument against the proposal seems to be that forcing those who provide services to retirement accounts to abide by a fiduciary standard will make servicing lower balance accounts economically unappealing. As a result, given that such investors do meet the minimums of traditional fee-only fiduciary advisors, they will have no access to “advice” at all.

We take issue with this misleading characterization of the status quo. The implication that “suitability”-governed salespeople are giving investors “advice” deserves forceful and repeated debunking.

Most consumers cannot rationally choose a fiduciary advisor over a salesperson because they do not know there is even a choice to be made. Research shows that more than 75% of investors are not aware that two different standards exist for those recommending investments. They often assume that all service providers (including those under the “suitability” standard) have their best interests at heart. A recent report issued by the PIABA demonstrates this point succinctly. The authors contrast the language used by major national brokerages in their marketing, with the positions these brokers take in arbitration proceedings when sued for losses caused by their misconduct.

Betterment supports the Department of Labor’s proposal to extend the fiduciary standard to anyone offering advisory services for retirement accounts. We believe that only unconflicted service is worthy of being called ‘advice.’

KEY TAKEAWAYS: The Department of Labor (DOL) has proposed to extend the fiduciary standard to anyone offering advisory services for retirement accounts. Organizations operating under the suitability standard are speaking out and spending aggressively to kill the proposal. advice/?utm_content=646556

California Public Employees Retirement System (CalPERS)

The California Public Employees Retirement System (CalPERS) supports efforts by the Department of Labor to update the employee benefit plan definition of “fiduciary” under the Employee Retirement Income Security Act of 1974 (ERISA). Although the proposed rule does not impact CalPERS, it does impact our members who have retirement savings outside of our system. The concept behind the Proposed Rule and exemptions appear to increase transparency, better protect the integrity of the retirement benefits, and compel financial professionals who provide retirement investment advice to act in their clients’ best interest.

Certified Financial Planner Board of Standards/Financial Planning Association/National Association of Personal Financial Advisors — together as the Financial Planning Coalition (the individual groups do not make statements; everything is done as the Financial Planning Coalition)

The Coalition brings a unique perspective to the table. Coalition stakeholders and members have committed to provide financial services under a fiduciary standard of conduct pursuant to each organization’s code of professional conduct. CFP® professionals and FPA members hold registrations and/or licenses across business models as investment adviser representatives, registered representatives of broker-dealers and/or insurance agents and in many instances hold dual or multiple registrations or licenses. Regardless of business model, or compensation model, they are obligated to provide financial planning services under a fiduciary standard of conduct. We seek to bring our experience, guiding our stakeholders and members in the application of the fiduciary standard across business and compensation models, to the Department in this comment letter.

The Coalition commends the Department for taking further steps to enhance protections for Retirement Investors. We believe that a strengthened fiduciary rule is necessary and appropriate for Advisers under ERISA, and strongly support adoption of the Department’s Re-Proposed Rule. The current regulatory framework allows Advisers’ interests to be misaligned with Retirement Investors’ interests. Under this framework, the current fiduciary definition under ERISA includes significant loopholes that allow for the sale of products that may not be in the best interest of the Retirement Investor. Importantly, while many Advisers seek to do what is best for their clients, others take advantage of regulatory gaps to steer their clients into high-cost, substandard investments that pay the Adviser well but eat away at Retirement Investors’ nest eggs over time.

Many in the financial services industry who claim that they support a best interest standard argue that the Re-Proposed Rule is unworkable. The Coalition believes, based on our experience applying the fiduciary standard to CFP® professionals across business models, that the Re- Proposed Rule is both workable and essential to protect America’s Retirement Investors. Importantly, the Department has demonstrated its willingness to work with industry and the public to develop a final rule that will increase fiduciary protection for tax-preferred retirement assets and at the same time works across the varied financial services business models.

Colorado Public Employees’ Retirement System

“… We want to express our support for rules that raise the bar for investment advice to help individual investors achieve retirement security. … Colorado PERA account holders have the choice to either leave their accounts with Colorado PERA, an investment overseen by fiduciaries, and retire with a monthly benefit or take a lump sum distribution of their account plus a match and invest it elsewhere. This is one of the biggest financial decisions a Colorado PERA member will make in their lifetime. We have received regular reports from members who have many years of service credit that get advice from financial advisers to give up the security of the monthly benefit and move the lump sum to an alternative investment vehicle. While that advice may be consistent with today’s suitability standard, it should be subject to a fiduciary standard for the adviser. The proposed rule would require the adviser to act as a fiduciary when recommending the alternative vehicle and target investments for the funds. … Colorado PERA manages $48 billion dollars on behalf of its membership and supports improvements to our capital markets. By requiring fiduciary advice, either to individual investors or institutional investors, we believe this will enhance our capital markets and benefit investors.

Committee for the Fiduciary Standard

From a public policy perspective, Americans saving and investing for retirement have been forced, without requisite training, into the role of “portfolio manager” for one of the most critical elements of financial security – their retirement. … What was supposed to be an adjunct savings vehicle, meant to supplement an individual’s employer pension plan – the traditional monthly payment to the retiree for life, is now, for most Americans, the primary vehicle in which to save and invest for retirement. Funding risk, investment risk, and distribution risk, all risks formerly borne by the employer, now rest on the shoulders of the individual employee. … It is time for every professional, and every company that has the privilege of advising retirement investors, to do so in the investor’s best interest, as a fiduciary. It is good public policy. American workers are working hard to save and invest for retirement and they expect that the advice they are getting on their retirement investing is in their best interest.

Financial Engines

We applaud the Department’s proposal to update the definition of fiduciary under 29 CFR 2510.3-21(c), and support the objective of improving protections for retirement investors by seeking to ensure that persons providing investment advice are subject to ERISA’s standards of fiduciary conduct. We share the concern that the current regulation may not adequately protect the interests of retirement investors and may limit unnecessarily the scope of ERISA’s fiduciary protections. ERISA’s fiduciary standards provide important protections against conflicts of interest and self-dealing and, particularly in light of changes in the financial industry, it is crucial now more than ever to re-examine the types of relationships that should give rise to fiduciary duties under ERISA and to apply these protections broadly. We thank the Department for encouraging input on the proposed regulation. Letter.pdf

Garrett Planning Network, Inc.

The current rules governing retirement plan assets were written 40 years ago and they’re not kept pace with the changing ways Americans now save and invest for retirement. Pension plans have been replaced by IRAs and 401(k)s, which didn’t exist 40 years ago. As a result, most workers and retirees make all the decisions about their retirement plan and investments. These options are critically important and often confusing. Those saving for retirement, or getting ready to make an important rollover decision, need objective advice more than ever. Unless the DOL rule is updated and broadened as proposed, many workers and retirees will continue to be vulnerable to conflicted advice from brokers who are not legally obligated to put their clients’ best interest first.

A survey conducted by the Financial Planning Coalition/CFA/NASAA showed that 97% of investors agree that “when you receive investment advice from a financial professional, the person providing the advice should put your interests ahead of theirs…” But that’s not the law of the land – and the American public doesn’t know this!

Americans pay a heavy price – amounting to tens to hundreds of thousands of dollars in lost retirement income – as a consequence of the status quo, which permits so called “trusted” financial advisors to profit at their clients’ expense.

I’ve seen this time and again in my 28 years in this business. This first 18 years I worked as a personal financial advisor, first as a registered representative and eventually as an hourly, fee- only advisor. Throughout most of this time I served Middle Income individual and families. My primary activity over the last 15 years has been spent consulting and coaching other financial planners and advisors who serve middle market clients.

I’ve witnessed cases involving dozens of individuals who were inappropriately “advised” to take an early retirement rollover from their company sponsored pension plan and invest the funds with someone they believed to be a competent and trusted advisor. Now these individuals are in their 60’s and financially devastated. They entrusted their entire retirement nest egg to “advisors” that did not put their best interest first.

Most financial advisors do have their client’s best interests in mind, however most are not legally obligated to put their client’s best interests first. Many of these advisors are ready, willing and able to serve as fiduciary advisors, even with those individuals of modest means, but often their companies do not support this change, as it will impact the company’s bottom line. If certain “advisors” and their companies don’t want to be held to the fiduciary standard, they must stop holding themselves out as advisors!

Workers and retirees need access to competent, objective financial advice and they need to be able to trust and rely upon that advice. This is the basis of fiduciary duty. I believe that anyone who holds themselves out as an advisor (e.g. renders advice) should be held to the fiduciary standard.

Office of the New York City Comptroller Scott M. Stringer

For generations, Americans have taken their hard-earned money to financial advisers to save for retirement, build a nest egg, and invest their life savings. Most have assumed that these investment professionals provide unbiased recommendations in their client-investor’s best interest. Unfortunately, for far too long, individual investors have been left in the dark about the true loyalties of many financial advisers. In short, outdated laws, regulations, and legal loopholes have made it hard for Americans to know whether advisers are following the highest investment standard—known as the fiduciary duty—in making their recommendations. The fiduciary duty is a legal promise that all investment advice must always be in the consumer’s best interest. It obligates advisers to disclose and avoid all conflicts of interests, recommend best value investment options, provide objective analysis and investment advice, and, above all, put the client’s interests before their own.

The Comptroller fully supports the President’s DOL proposal, which will have an enormous effect on safeguarding American’s retirement savings.

New York State Comptroller Thomas DiNapoli

I am writing in support of a rule proposed by the United States Department of Labor (USDOL), published in the Federal Register on April 20, 2015, which clarifies the definition of the term “fiduciary” and expands the conflict of interest rule for those who provide retirement investment advice. I applaud USDOL for carefully considering the comments received following its initial publication of a proposed fiduciary rule in 2010 and for crafting a common sense and balanced solution. The new proposed rule offers an enforceable best-interest standard that will protect plan sponsors, employees, beneficiaries, and the investment advisors who put the interests of their clients ahead of all other considerations. The USDOL proposed rule improves transparency and mitigates the harmful effects of conflicts of interest. … When workers turn to their retirement plan advisors for guidance, they should be able to trust that their advisors are telling them the truth about their investments and fees, and acting in their best interest. … Further, USDOL’s proposed rule will level the playing field for those advisors who already put

their customers’ interests first. And, the expected benefits to workers trying to save for retirement far outweigh the rule’s moderate costs to implement. USDOL has been thorough and thoughtful in its consideration of comments received after its 2010 proposal and it has been extremely generous in extending the comment period for the current proposed fiduciary duty rule. It is now time to close the loopholes in outdated fiduciary and conflict of interest rules. The current proposal reflects a reasoned and reasonable approach by USDOL to meet the needs of workers and their beneficiaries who cannot afford to wait for help in protecting their retirement.

Personal Capital

Importance of “Best Interest”

The “broker” paradigm is a sales-oriented business model. Brokers are salespeople who are incented to recommend those financial products that make the most money for them and their firm. Often, they work from a “grid” specifying different amounts they are paid for selling different products. This necessarily results in conflicted advice and suboptimal investment strategies.

The “advisory” paradigm is an advice-oriented business model. Because true advisors are paid on a fee-only basis, they are incented to provide the best and unbiased advice – they are not paid different compensation for putting their customers in different investment products. In the vast majority of cases, true advisors do not accept hidden or backend compensation from the purveyors of investment products. (In the few instances in which they do, they are required to disclose these arrangements in public filings and to provide those filings to their customers both before and after the customer engages them.) It is essential that consumers receive unbiased financial advice when setting up their long-term investment plans – particularly those investments designed to meet their needs in retirement such as invested in 401k, 403b and IRA accounts. Advice that is not in the customer’s best interest is not really advice at all…it’s sales.

Financial advice from unconflicted advisors is key to creating a secure retirement. For most families, sufficient savings, safe diversified investments and low-cost services are the three important drivers of long-term financial success.


Charles Ellis is the former chairman of the Yale Endowment Investment Committee. Scott Puritz is the managing director of Rebalance-IRA, a technology-enhanced national investment service that has offices in Bethesda and Palo Alto, Calif.

It’s time to hold all financial professionals accountable by consistently requiring them to act in the best interests of their clients. That’s what the DOL rule can do. Americans struggling to save for a dignified retirement should no longer be subjected to the conflicts of interest that are bleeding off their savings. And, if traditional brokerage firms can’t live with the simple fiduciary standard and refuse to serve modest savers, so be it. Other financial professionals on and off the

Web who embrace the client-first approach stand ready to help all Americans prepare for a secure retirement story.html

Marc A. Roth, President , JMR Capital Management, San Francisco

Perhaps the next time he visits his district the congressman may want to attend a sales meeting at a local brokerage firm or insurance company and listen in as the sales force is exhorted by its managers to meet the gross commission benchmark targets. Higher payouts and a possible paid vacation might be in the works. The client doesn’t benefit from this, and the idea that an investment is “suitable” is a very low bar.
(letter to the editor of the Wall Street Journal in response to Rep. Randy Hultgren’s op-ed)

David Swensen, Yale University’s chief investment officer

Says he’s hopeful the final rule will make a big difference for millions of Americans. But he says, “I think the biggest threat to this rule is Wall Street’s reaction.” He adds, “[It] will clearly cost Wall Street in terms of the bottom line, and they’re going to fight it tooth and nail.” That’s because if advisers had to act as true fiduciaries they wouldn’t be steering clients into mutual funds or other investment vehicles with very high fees. wall-street

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