Massachusetts consumers stand to lose access to vital retirement planning and other financial advice under a proposed state regulation, according to the Insured Retirement Institute (IRI), the leading national trade association for the retirement income industry.
At a Massachusetts Securities Division hearing held recently on a proposal to impose an additional layer of regulations on providers of financial advice, Wayne Chopus, IRI president and CEO cautioned regulators that, while well-intentioned, the proposed regulation could limit consumers’ access to valuable financial planning services and products.
Chopus urged that Massachusetts should allow the U.S. Securities and Exchange Commission’s Regulation Best Interest (Reg BI) to take effect and be allowed time to evaluate its consumer protections before additional, potentially duplicative regulations are considered. Reg BI is a federal standard of conduct rule that is scheduled to take effect July 1, 2020 (barring a possible delay due to a pair of lawsuits filed against it).
Massachusetts’ Secretary of the Commonwealth William Galvin, the state’s chief securities regulator, signed off on new regulations late last November that would impose a uniform fiduciary conduct standard on broker-dealers, agents, investment advisors, and investment advisor representatives when dealing with their customers and clients.
Last week’s hearing on the proposed regulations provided IRI with an opportunity to voice its objections.
“Reg BI represents a substantial strengthening of investor protection compared to existing law in a manner that is consistent with the principle that financial professionals should be required to act in their clients’ best interest when providing personalized investment advice,” Chopus said. “In our view, Reg BI will achieve the Division’s goals without the need for further rulemaking. Moreover, it does so in a manner that will preserve investor choice and access to the products and services they need to achieve their financial goals.”
Galvin has said he proposed this uniform fiduciary standard on broker-dealers and investment advisers because “the SEC has failed to provide investors with the protections they need against conflicts of interest in the financial industry with its ‘Regulation Best Interest’ rule. My Office has seen firsthand the serious financial harm that investors and savers have suffered as a result of conflicted financial advice. Investors must come first.”
But IRI argues that the proposed regulation ignores the differences between the types of financial professionals and could have an adverse impact on investor choice, cost, and investor access in the market for financial advice.
“Reg BI recognizes and seeks to preserve the important and valuable distinctions between different types of financial professionals,” Chopus said. “Reg BI will help investors understand the differences between broker-dealers and investment advisers, thereby enabling them to make informed decisions about the type of financial professional that would best meet their needs.”
IRI noted that implementation of the Massachusetts regulation would make the Bay State an outlier among other states and make it more difficult for financial services businesses to operate in the state.
“We fear that the proposal will drive firms to significantly scale back their offerings in Massachusetts or potentially even discontinue operating in Massachusetts. If this comes to pass, the citizens of Massachusetts will ultimately lose access to the wide variety of products and services available to other Americans to help them achieve their financial goals,” Chopus said.
“A fiduciary standard is not some sort of panacea. The new federal best interest standard is a substantial enhancement over current federal law and will adequately address Massachusetts regulators concerns about consumer protection,” Chopus said. “A person with bad intentions cannot be wrapped in a fiduciary tunic and somehow be transformed into a beacon of truth and honesty.”
Chopus concluded his comments at the hearing by respectfully urging the Division to “refrain from finalizing the proposal at this time and to instead re-evaluate whether the proposal—or some variation thereof—is still necessary once Reg BI has been in effect long enough to assess its effectiveness.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
