In April 2016, after years of study and public debate, the Department of Labor (DOL) finalized the fiduciary rule. The rule, which was supposed to be effective this April, requires money managers who provide retirement advice to act in their customers’ best interests. At Betterment, we have long been supporters of the rule. In 2015, we first submitted a public comment in which we explained the rule’s benefits and took issue with the misleading arguments advanced by financial firms fighting the rule.
After this fall’s presidential election, there was widespread speculation about whether the rule would be rolled back. We publicly asked then-President-elect Donald Trump to keep the fiduciary rule intact and sent a letter to Sen. Elizabeth Warren, D-Mass., explaining our support for the rule.
On Feb. 3, President Trump signed a memorandum directing the DOL to reconsider the rule, signaling that it was at risk of being delayed or withdrawn. On March 2, the DOL formally proposed a 60-day delay of the rule and stated that it was beginning the review called for by the president.
Now, we’ve submitted the below official public comment to the DOL, expressing our concerns that a delay would needlessly harm investors and, even worse, could be used as an opportunity to weaken or repeal the rule.
Betterment’s Letter to the Department of Labor
Ladies and Gentlemen,
I am writing on behalf of Betterment LLC, an SEC-registered investment advisor, in opposition to the proposed delay of the Department of Labor’s fiduciary rule. As an automated investment service that provides fiduciary advice to more than 220,000 clients, we are strong supporters of the rule.
The fiduciary rule is necessary to ensure that Americans receive investment advice that is in their own interests, instead of conflicted sales pitches for high-fee products. For years, the financial industry has put its own interests first, costing investors billions of dollars. The fiduciary rule, which is currently slated to go into effect on April 10, would change that. We believe that any delay would needlessly perpetuate conflicted advice at investors’ expense.
Betterment has consistently supported the fiduciary rule and submitted a formal comment expressing our support in September 2015. Before finalizing the rule, the Department of Labor considered an extensive factual record and thousands of comments. The Department of Labor also significantly adjusted its initial proposal to accommodate the legitimate concerns of impacted firms. Since then, the industry has had nearly a year to prepare for the rule’s applicability and has expended significant resources in doing so.
The fiduciary rule may not be perfect—no regulation ever is. But the fiduciary rule is the only realistic hope for prompt action to improve the quality of retirement advice. A delay would be bad enough, but it would be even worse if the delay is used as an opportunity to dilute the rule or remove it altogether. We are extremely concerned about this possibility. If the Department of Labor wishes to further consider or revise aspects of the fiduciary rule, it can certainly do so once the rule is actually in effect. That is, the Department can take another look at the rule without imposing a delay that would imperil the rule itself.
Some firms that have opposed the rule claim that a “unified best interests standard,” which would also cover non-retirement accounts, would be preferable. That sounds great in theory, but it is not realistically happening any time soon—and these firms know it. The fiduciary rule has already let to positive changes in the investment industry, such as reductions in fund fees and changes to conflicted service models. If the rule is delayed or watered down, these positive changes could disappear.
For the benefit of the millions of Americans saving for retirement, we ask that the Department of Labor allow the fiduciary rule to go into effect this April.
Founder & CEO
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