The Department of Labor has issued the final version of its
retirement advice rule covering a host of advice scenarios,
including retirement plan rollovers and annuity sales. ADISA is
encouraged by some of the changes but disappointed by the lack of
independent analysis of intended and unintended
consequences.
INDIANAPOLIS, April 23,
2024 /PRNewswire/ -- ADISA, the nation's largest
trade association for the alternative and direct investment space,
reacted to the announcement today from the Department of Labor's
Employee Benefits Security Administration, which came more than six
years after an industry legal challenge led to an appeals court
decision that vacated the last Democratic presidential
administration's attempt to expand the fiduciary duty to more areas
of retirement advice.
The DOL's final rule would require financial advisors and other
retirement professionals to put client's best interests first when
making recommendations for rollovers to individual retirement
accounts and certain annuities. It would treat as fiduciaries those
persons that make "professional investment recommendations to
investors on a regular basis as part of their business" where the
recommendation is made under circumstances "that would indicate…
that the recommendation is based on review of the retirement
investor's particular needs or individual circumstances, reflects
the application of professional or expert judgment to the
retirement investor's particular needs or individual circumstances,
and may be relied upon by the retirement investor as intended to
advance the retirement investor's best interest."
Speaking for ADISA, which participated in the rulemaking process
both through testimony as well as a detailed comment letter,
ADISA's Legislative & Regulatory Committee Co-Chair
John Grady said the rule as adopted
was amended from the proposed rule in order to respond to comments
from the industry. "It remains to be seen whether these changes
will have any material impact on how the rule is applied to
broker-dealers and other ADISA members that recommend alternative
investments to their clients," said Grady, adding that "the rule's
focus on the context for the recommendation means that the
Department heard the concerns expressed by ADISA and others that
the revised definition of fiduciary, as proposed, would capture
transactions that did not bear the hallmarks of a fiduciary
interaction."
ADISA expressed concern throughout the rulemaking process that
the DOL was not taking steps to ensure that the rule's impact would
be studied and understood before it was finalized. The
association's members primarily serve retail investors who have
worked hard, saved along the way, and desired access to investment
products that operate outside of the traded stock and bond markets.
These investments have traditionally been available solely to
wealthy individuals, but making them available to retirement and
other savers, where appropriate to their circumstance, can be a
powerful driver of returns. A 2021 Hispanic Leadership Fund study
demonstrated the devastating effects of reviving the 2016 fiduciary
rule, as would be done by the Rule as finalized: it would have the
greatest adverse effect on Black and Hispanic retirement savers,
reducing their projected accumulated IRA savings by approximately
20 percent over 10 years and contributing to an approximately 20
percent increase in the wealth gap attributable to IRAs for these
individuals.
According to ADISA's Legislative & Regulatory Committee
Co-Chair Catherine Bowman, "In
moving quickly to adopt an important and far-reaching rule, the DOL
missed the opportunity to do the kind of vital, painstaking
research needed to understand both the intended and perhaps
unintended effects of the rule on small balance savers, older
savers, new savers and savers from communities that have
experienced and continue to experience wealth and retirement
savings gaps."
The rule is slated to go into effect on Sept. 23, which gives advisors and other industry
professionals a mere five months to prepare for implementation.
ABOUT ADISA
The Alternative & Direct Investment
Securities Association is the nation's largest trade association
representing the non‐traded alternative investment space. ADISA's
members are typically involved in non-traded real estate investment
trusts, business development companies, master limited partnerships
and private and public funds (LPs/LLCs), 1031 exchange programs
(DSTs/TICs), energy and oil and gas interests, equipment leasing
programs, or other alternative and direct investment offerings. The
association was founded in 2003 and has approximately 5,000 members
who are key decision makers, representing more than 220,000
professionals throughout the nation – including sponsor members who
have raised in excess of $200 billion
in equity and serve more than 1 million investors.
Contact: Jill Swartz
Spotlight Marketing Communications
jill@spotlightmarcom.com
949.427.1389
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SOURCE ADISA