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Suitability Standard = 1; Retirement Savers = 0.


Craig Howell has spent the last seven years in business development with Ubiquity Retirement + Savings, a FinTech organization focused on delivering simple, low-cost, retirement savings plans for small businesses and their employees.


November 8, 2013 at 11:46 am
Retirement News


This week, the House of Representatives passed H.R. 2374 – The Retail Investor Protection Act – which would prevent the DOL from broadening the definition of Fiduciary without, basically, allowing the SEC to go first.

That’s fair enough, I understand the need for coordination between bodies like the DOL and SEC.

I also understand the need for the Suitability Standard (to sell product) versus the Fiduciary Standard (to give advice in the sole best interest of the customers).

Each standard has its place; Suitability, for example, allows brokers to sell IPOs to sophisticated investors. We could use better disclosure, but that some salespeople operate under Suitability isn’t the issue, for me.

In arguing for HR 2374, John Kline (R-MN) argued against the DOL’s work to broaden the Fiduciary definition as it applies to ERISA, claiming that this would, “Drive up costs, restrict investment opportunities, and harm efforts to educate workers about responsible retirement planning.” In my opinion, that’s a frustrating untruth.

How, Representative Kline, would the departure of those operating under a “suitability” standard from the ERISA market place lead to this result?

Are you unaware that this standard allows products that are merely “suitable” – including cost – to be sold to Retirement Savers? How many of those Americans you “protect” understand the people selling these products are merely held to that standard?

Are you unaware that the tens of thousands of Registered Investment Advisers serving the 401(k) market are bound to operate in the best interests of the clients, and that the twin principle of pricing transparency – forced upon the 401(k) industry by the very same DOL in the form of 408(b)(2) – has relentlessly driven cost from the industry directly into the pockets of Retirement Savers?

As I interpret your argument on behalf of the Suitability Industry, Representative Kline, it reads, “If we can’t sell the product on our shelf, which is merely deemed suitable, then we’ll exit the market altogether, and there won’t be any products available.” What an argument: cheating them is better than nothing.

All in all, American retirement account holders need fiduciary advice, and that fiduciary advice is readily available. The title of your Bill, Representative Kline, and your argument, couldn’t be any more ironic.