Court says Obama administration's fiduciary rule will stand
- A federal judge denied a national insurance group’s request to put the new fiduciary rule on hold, reports the Wall Street Journal. Washington, D.C.’s U.S. District Court denied the National Association for Fixed Annuities’ request, handing the Obama administration a victory after a string of lawsuits.
- The new rule revises the way financial advisers and brokers do business with consumers saving for retirement. It designates brokers and advisers handling retirement accounts as “fiduciaries,” who must act in the account holder’s best interest and not their own. The regulation tightens standards that previously required brokers to give account holders only “suitable” advice.
- NAFA and several businesses in the financial industry filed suits against the new rule, arguing that it will significantly increase business costs. So far, NAFA is the only litigant to receive a hearing and a ruling.
The Indexed Annuity Leadership Council (IALC), another litigant in a case against the regulation, argued that the rule will hinder access to products and information to retirees who need it most and that it “creates unworkable standards” for independent agents and insurance companies.
The Labor Department enacted the rule to protect consumers from unfair practices, such as being sold products they didn’t need. Studies have shown that employees want and need more financial information from their employers, and the new regulation is one way to ensure that they get it.
Could companies be held liable if brokers or advisers in their retirement plans violate the fiduciary rule? If so, careful monitoring of employee-broker relationships might be necessary. Either way, it would be wise for HR departments to continue to upgrade existing benefits technologies in the interest of compliance — robo-advisors are on the way.
- Wall Street Journal Federal Judge Rejects Trade Group’s Challenge Against Retirement-Advice Rule