The Labor Department's hotly contested proposed fiduciary rule continues to draw praise from supporters and the industry's ire.

In the latest volley SIFMA slammed the proposed rule, repeating previous criticisms that it has unworkable exemptions, would be cumbersome to implement and restrict clients' choices. But that wasn't all.

"Our real concern is that the department goes beyond, frankly, its authority and is in conflict with existing securities law," SIFMA CEO Ken Bentsen said during a conference call with reporters.

Bentsen said the proposed rule could end up overlapping with a forthcoming SEC fiduciary standard, creating confusion for advisors and clients.

Bentsen repeated SIFMA's desire that the SEC lead the effort to craft a fiduciary standard, not the Labor Department, saying that "securities regulators should be driving this train."

Though both sides say they want to see a new fiduciary standard to protect clients, they remain sharply divided over nearly everything else. For example, SIFMA said in its comment letter that implementing the rule could cost firms nearly $5 billion in start-up costs alone, according to a survey it conducted. In its analysis, the DoL projected costs between $2.4 billion and $5.7 billion over 10 years.

Bentsen said that the proposed rule is an example of "a failure in the public policy marketplace."

A spokesman for the Labor Department could not be reached for comment.


The Labor Department's proposed rule would affect advisors providing certain types of retirement advice, and it is crafting the rule under ERISA, a labor Law from 1974.

The DoL recently indicated it is open to making changes to the proposed rule.

"We've identified what we believe are demonstrable injuries that flow from the current compensation structure, the current way advice is delivered to retirement investors," Timothy Hauser, a deputy assistant secretary, said during a meeting of the SEC's Investor Advisory Committee. "We're committed to doing something to fix that problem but we aren't necessarily wedded to any particular -- you know -- choice of words or regulatory text. The point is to improve this marketplace."

In its comment letter, SIFMA says that the Labor Department's rule "seeks to turn sales pitches and cold calls into fiduciary conversations."

"The proposal so narrows 'financial education' that only those already educated will understand what they are being told under the Department’s new regime," SIFMA says.

SIFMA prefers the industry's traditional regulators, the SEC and FINRA, to take the lead because of their authority and flexibility to craft rules more carefully, Bentsen said, adding that ERISA was a "blunt law."

In particular, the group highlighted what it called "unworkable" exemptions to the department's rule.

SIFMA said in its comment letter that "many of the requirements of the exemptions are so broad, subjective, and ambiguous in certain areas that it would be impossible to build systems and processes to ensure compliance."

Bentsen said that it could be difficult for firms and advisors to live with poorly written exemptions while the DoL reworked the language.

"It underscores the rigid nature of this whole process," he said.

In its comment letter, SIFMA said the rule would add new costs for firms trying to comply with it.

During recent earnings calls, analysts have repeatedly asked executives of major wealth management firms what the costs could ultimately be. Generally, they've predicted higher expenses without giving specific figures.

Speaking during an earnings call on the same day SIFMA issued its comment letter, Morgan Stanley CFO Ruth Porat said her firm expected "more compliance related costs."

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