Executives of the National Association of Insurance and Financial Advisors have taken their concerns about the Department of Labor’s proposed fiduciary rule to the White House and next week the association and its members will meet again with lawmakers to discuss the impact it could have on benefit advisers.

Last week, NAIFA President Juli McNeely and past president Terry Headley met with White House staff to talk about how the DOL proposal would impact their businesses. The association says The White House has invited them back for further discussion, a “good sign they are listening,” according to NAIFA’s Vice President of communications and marketing, Sheila Owens.

On May 20, she says, nearly 800 NAIFA members will also meet with their senators and representatives in Congress to discuss adviser concerns with the proposed rule, including concerns it is too “complex and costly” and could ultimately reduce consumer choice and access to affordable financial advice.

See related: DOL proposed fiduciary rule: What advisers need to know

The association says the new fiduciary definition means NAIFA members who have operated effectively on behalf of clients under a suitability standard would now be considered fiduciaries and subject to fiduciary-specific restrictions under ERISA and the tax code.

“As currently written, the proposed rule is unworkable for retirement savers and their advisers,” the association says on its website. “It would fundamentally change the way advisers do business, disrupt long-established client-adviser relationships, increase costs for advisers and consumers and prevent advisers from providing retirement investors with certain types of important advice and services.”

With the new rules in place, advisers would either shift their practices away from the retirement sector or would drop middle- and lower-market clients who would not be able to afford the increased costs, the association fears.

See related: How will the DOL’s proposed rule expand the definition of fiduciary

“Regulations are important to protect consumers and to ensure their continued faith in their financial advisers,” says NAIFA President Juli McNeely. “But regulations should be smart and address real problems. They should not hinder access to professional guidance by imposing higher costs for services to those who need it the most: lower- and middle-income retirement savers.”

The cost of doing business

A leading concern for NAIFA and its members, according to the association, is a fear that the proposed rule would drive up the cost of retirement investment advice and services.

Under the proposed rule, advisers receiving commissions, revenue-sharing and other third-party compensation would be required to sign a best interest contract with clients, which the association calls “complicated and potentially confusing.” The contract would require advisers to act in the best interest of the ERISA-defined retirement investor, adopt written policies to mitigate conflicts of interests, and complete increased disclosures and paperwork with each transaction.

The exemption would also require advisers to complete an annual disclosure document for each client detailing all transactions, fees and expenses, and the adviser’s direct and indirect compensation.

Financial institutions would also have to maintain and update web sites that show the amount of compensation advisers would receive for each of its product offerings.

The increased paperwork, record-keeping requirements and disclosures combined with the need for financial institutions to create and frequently update web sites “would drive up the cost of advice and services,” NAIFA says.

Additionally, the best interest contract would increase advisers’ liability and potentially expose them to “frivolous lawsuits,” the association claims. “Advisers could be sued in state courts for alleged contract violations and in federal court for alleged violations of fiduciary duty under ERISA. In these suits, the burden of proof would be on the adviser.”

The increased liability, the association says, would inevitably increase advisers’ errors and omissions insurance, a cost they say would need to be passed along to consumers.

On May 19, NAIFA members will attend an advocacy briefing hosted by NAIFA and on May 20, the 800 attendees will go to Capitol Hill for meetings with their senators and representatives.

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