The DOL Fiduciary Rule: Simply Great for the U.S. Economy, American Corporations

ALL POSTS PRIOR TO 2021 HAVE NOT BEEN REVIEWED NOR APPROVED BY ANY FIRM OR INSTITUTION, AND REFLECT ONLY THE PERSONAL VIEWS OF THE AUTHOR.

Dear U.S. Dept. of Labor Secretary Acosta:

Two very important considerations relating to U.S. Business and the U.S. Economy are often overlooked in discussions about the DOL’s Conflict of Interest Rule:

FIRST - The Rule Benefits American Business, via Minimization of the Risks of Plan Sponsors.

Currently firms that sponsor ERISA-covered qualified retirement plans are at substantial litigation risk, due to lack of expertise in choosing the right lineup of investment options.

Interestingly, in most cases, the “retirement plan consultant” to the plan sponsor, who provided recommendations as to which funds to include in the plan, is “off the hook” (as they hide behind the suitability shield). Hence, broker-dealer firms are often dismissed (or granted summary judgment) in the initial phases of class action lawsuits brought by plan beneficiaries against the plan sponsors.

In essence, a delay and/or repeal of the DOL fiduciary rule will hurt American business owners (plan sponsors), large and small, by shifting risk from broker-dealer firms to most other American businesses.

With the DOL fiduciary rule in place, business owners will then be entitled to rely upon the advice they were provided. Since business owners large and small are not typically highly trained in the worlds of portfolio design and investment product selection, this only seems fair. Business owners concentrate on growing their business. And business owners higher trusted experts to assist them with navigating the complex world of investments.

SECOND - The Rule Benefits the U.S. Economy, as it Fosters Greater Accumulation of Capital. This in Turn Lowers the Cost of Capital for U.S. Firms and Spurs U.S. Economic Development.

The prospect of the DOL Rule has already resulted in substantial reductions in asset management fees at a number of mutual fund companies and other product providers.

The academic research is clear – lower fees and costs result in higher returns for individual investors, and greater accumulations in their retirement nest eggs. Currently the excessive extraction of rents by Wall Street firms and the insurance companies substantially impairs the growth of retirement nest eggs. This means that senior citizens will need greater services - from all levels of government - during their retirement years. This is a burden governments can ill-afford in the future, and will likely mean greater levels of taxation upon our citizens.

Just as importantly, lower investment product fees result in greater accumulation of capital in our economy. Over time, the impact is huge. Just as a rough estimate, we are talking about a likely 10% to 20% greater accumulation of capital over the next 20 years (and possibly much more). Even greater benefits result later, as the effect is cumulative.

The accumulation of capital, in turn, provides the fuel to turn the innovations from our researchers in American business and higher education into new products, bringing new benefits to Americans and to the world.

Such greater accumulations of capital can also lower the costs of capital to American business. This spurs on the undertaking of additional projects, which in turn results in both greater profits to American business and greater economic growth.

IN SUMMARY, when you expand the army of trusted, expert advisers to aid American business owners, qualified retirement plan participants, and IRA owners, GREAT THINGS HAPPEN.

Please consider the interests of all businesses, large and small. (Not just the handful of Wall Street firms and insurance companies that oppose the fiduciary rule.) And please consider how the DOL Fiduciary Rule will promote new business formation, job creation, and the expansion of the U.S. economy.

Thank you.