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August 11, 2015

DOL Hearing Day 2 Summary

The key takeaway from the second day of an unprecedented four days of a public hearing at the Department of Labor (DOL) to discuss its proposed best interest fiduciary rule:

Outdated rules with loopholes enabling conflicted investment advice that hurts retirement savers desperately need change, yet the industry continues to defend the status quo — second-rate advice under the suitability standard that fails to live up to a best interest standard.

At this point in the debate, it is settled that gaps in the DOL’s 40-year old rule have created a flawed system, one that allows advisers to put their own interests ahead of their clients,” testified Stephen Hall, Securities Specialist at Better Markets. “It is also settled that workers and retirees are suffering terrible losses as a result.”

“Almost every week, we see a retiree come into our office who has lost a substantial amount of his life savings…These retirees break down in my office when I explain to them how their investment was lost to conflicted advice…Swift action to confirm a strong fiduciary duty will help prevent this from happening to any other retirees in the future and ensure that, if it does happen, that brokers and brokerage firms that breach this duty will be held accountable,” – Joseph Peiffer, President, Public Investors Arbitration Bar Association (PIABA).

“Those most affected by heavier prices are those with more modest means…the status quo permits trusted advisers to profit at their client’s expense,” – Sheryl Garrett, Garrett Planning Network.  

“Competition in a market where investors can’t distinguish the quality of the advice leads to a race to the bottom,” – Antoinette Schoar, Professor of Finance, MIT Sloan School of Management.

“[In one] study people who didn’t have advice did better than people who relied on brokers,” – Jonathan Reuter, Associate Professor of Finance, Carroll School of Management, Boston College.

Once again, today’s panels confirmed what we all know — the current DOL fiduciary rule is severely deficient at protecting America’s retirement savers. It must be updated as DOL has proposed to give workers and retirees the access to best interest advice they need to build a more secure and dignified retirement.

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