December 19, 2011

Labor's Tenacious Rule Maker Isn't Done With 'Fiduciary' Fight

Los Angeles partner Fred Reish was quoted in Investment News in an article on plans by Assistant Labor Secretary Phyllis Borzi to reissue a proposed a regulation that would expand the definition of "fiduciary" when giving advice to a retirement plan.


The Financial Services Institute Inc. hopes that a year of talks with Borzi and the Department of Labor will lead to a revamped fiduciary rule that works with the industry's business model.


While Borzi's interactions with the broker-dealer industry could yield a more workable way to address IRAs within firms' business model, Fred noted that a tense compromise between the agency and the industry could follow. Perhaps broker-dealers would have to fully disclose their compensation when selling individual retirement accounts so that investors could make educated decisions, he said.


Fred, a member of the firm’s Employee Benefits & Executive Compensation Practice Group and chair of the Financial Services ERISA Team, said a more stringent solution would be to require that brokers selling IRA investments collect standardized fees, regardless of what they recommend.


"I think the DOL has learned a lot more about how business is conducted in the 401(k) community, and more so with IRAs, so they'll take that into account and write some rules that are easier to deal with," he added. "But the financial services industry will need to change some practices, so there will be continuing tension."


To read the entire article, click here.



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