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DOL Comment Letter Dump: Top Firms Finally Weigh In

Following the July 21 deadline for public comments, the Department of Labor on Thursday night released an additional 250 public comment letters from some of the industry’s largest financial services firms, including Bank of America, Edward Jones, Morgan Stanley and Wells Fargo.

Most national brokerages followed the Securities Industry and Financial Markets Association’s lead in supporting a uniform best interest standard, but said the Labor Department’s current proposal is too broad, too strict in others and too complex overall.

“While we believe the current draft of the rule overreaches in several important areas, in one respect, it does not go far enough: retail investors should get the benefit of an enforceable best interest standard whenever they receive personalized investment advice, whether from a broker/dealers or investment advisors and for all accounts, not just IRAs,” Bank of America wrote in its comment letter, which called for the DOL to halt its rulemaking process until after the Securities and Exchange Commission moved forward.

The firms also echoed earlier arguments that the proposal would put an unfair burden on advisors working with smaller investors, like those looking to roll over 401(k) plans into brokerage-held IRAs.

“The impact of the proposed rule will fall disproportionately on lower and moderate-income investors who stand likely to lose access to affordable guidance and assistance that is crucial if they are to meet their retirement savings needs,” Edward Jones argues in its comment letter.

Here are the highlights: 



“The unintended consequence of such expansion will be to force brokerage firms to stop offering self-directed IRA brokerage accounts in favor of placing such accounts on their advisory platforms.” writes Stifel.

Specifically, the firm notes that it has over 300,000 IRA accounts. “Over80 percent of these IRAs are non-managed brokerage accounts. It is important to note that Stifel’s non-managed IRAs are charged, on average, 47 basis points less ;than Stifel’s managed IRA accounts. Moving these non-managed IRAs to Stifel’s advisory program would cost these investors in excess of $150 million annually,” the firm calculates.

Stifel Comment Letter


“Given the complexity of the proposal in its current form, the eight month implementation time period is simply unattainable and unrealistic. We believe three years, if not more, is necessary to ensure all the requirements of the Department’s proposed rule are properly implemented,” writes Wells Fargo.

Wells Fargo Comment Letter


“The information required is so complex that it will likely confuse, rather than inform consumers, and the requirement of trade by trade pre-purchase written disclosures may delay the execution of clients’ transactions,” writes Morgan Stanley of the DOL’s proposed disclosure requirements.

Morgan Stanley Comment Letter


“We are concerned that the advisor community will by default gravitate instead to simple, low-cost products focusing only on accumulating assets for retirement, at the expense of the essential work with clients to plan for and address long-term retirement income needs,” write AIG’s CEO Kevin Hogan. 

AIG Comment Letter


“We fear that such a singular focus on conflicts in the brokerage business model will unwittingly permit real issues – such as a lack of adequate savings incentives and financial planning literacy – to perpetuate unaddressed,” RBC Wealth Management contends in its comment letter.

RBC Wealth Management Comment Letter


“An advisor cannot even make a hold recommendation during a market downturn, without complying with all of the proposal’s requirements. Without an appropriately drawn grandfather rule, millions of existing advisory relationships will be disturbed unnecessarily.

“Unless the right balance is struck, some investors will be forced into fee-based advisory relationships that may cost more than current commissionable arrangements.

“Unless changes are made, it is simply going to be much easier for financial advisors to do business on a fee basis; that is, pursuant to an arrangement in which the advisor’s compensation is charged separately and does not vary based on the investment recommendation provided. Virtually all of our financial intermediaries do business in both a fee-based capacity and a brokerage capacity, and the majority of registered representatives are also investment advisor representatives. Without changes, we foresee a dramatic acceleration of the existing trend away from commission-based advice to fee-based advice,” write the managers of American Funds.

Cap Group Comment Letter


“The “broker” paradigm is a sales-oriented business model. Brokers are salespeople who are incented to recommend those financial products that make the most money for them and their firm. Often, they work from a “grid” specifying different amounts they are paid for selling different products. This necessarily results in conflicted advice and suboptimal investment strategies.

“Advice that is not in the customer’s best interest is not really advice at all…it’s sales.

“For too long, Americans who are saving for retirement have been losing money because of the brokerage model. These savers need the protections that this rule will provide. I urge the Department of Labor to finalize and implement this rule as soon as possible,” writes the CEO Bill Harris.

Personal Capital


“We were built from the ground up to operate under the full fiduciary standard despite serving small accounts and charging incredibly low fees

“Wealthfront is living proof that not only is it possible to provide fiduciary service at low cost to small investors nationwide, but also that the market greatly rewards those efforts. Charles Schwab, a firm who has hundreds of branches across the U.S. now offers this type of service to small accounts as well, giving tens of thousands access to fiduciary investment advice. We are confident our industry leading automated investment service will grow to serve a very large number of small investors,” CEO Adam Nash says.

WealthFront Comment Letter

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