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Industry Group Weighs In On New Fiduciary Rule


And to hear the view from someone whose profession is a target of this rule, we reached Jules Gaudreau. He's president of the National Association of Insurance and Financial Advisers, or NAIFA. It's a group of brokers who sell insurance and other financial products, typically on commission. Thank you for joining us.

JULES GAUDREAU: Thanks, Renee. Good morning.

MONTAGNE: You've just heard Chris' story. And in a statement yesterday, you said the big losers of this new rule would be investors - specifically lower and medium-income investors. And that's many of us - the very folks that the government is trying to protect. Can't brokers make money on these smaller accounts?

GAUDREAU: Well, that's a great question, Renee. I think that what we were concerned with with the earlier Department of Labor proposal is that it would in essence create a walled garden around most types of financial education by disallowing any specific advice without first executing a best-interest contract and all sorts of disclosure obligations. The concern is that this dramatic increase in the cost and complexity of running an advisory practice would push many advisers away from small and moderate-income investors - the people, really, who need us most. I think there are bad actors in every profession. And no amount of regulation is going to stop and make it 100 percent perfect. But the fact is that we've always been guided by a best-interest standard in our profession and in dealing with our clients. And at NAIFA, all of our members subscribe to a code of ethics which states their best interest pledge.

MONTAGNE: Well, let me just ask you, though - give us an example of what this complex group of rules - how that would, as you put it, dramatically increase the costs to the brokers and therefore make it a problem for the clients.

GAUDREAU: Well, there are a couple things. First of all, it's a rule that's many hundreds of pages long. So it's not just a simple statement of brokers will work in the best interests of their clients. As a matter of fact, it's so complex that I'm sure regulatory attorneys are going to be looking to define this with the Department of Labor for years to come. But the problem is, is in these many hundreds of pages of regulations, it forces advisers to this massive degree of disclosure and having contracts with clients before they even begin their relationship. And so you can imagine that regulations that make it very, very difficult for advisers to have an unfettered relationship with their consumers could push some advisers away from small and moderate-income investors.

MONTAGNE: If brokers are good members of their community, and they are providing this service that you say they are, by and large, over time wouldn't these rules effectively be put into practice and become simpler?

GAUDREAU: We agreed right from the beginning that advisers should be held to a higher standard - a best interest standard for their clients. And we've worked with the DOL over the last year. We've provided testimony to members of Congress. And hopefully the DOL has heard those concerns because obviously what's not needed is more and more complex regulation, but sensible regulation. And I think you're right in many of your assertions - that over time this will certainly improve the environment and the climate. Some have said, oh, it'll just be another couple of forms that consumers will have to sign. And if that's all it is - if it's, like, every time you open an investment account it's like going to a mortgage closing when you buy a house, and you're signing things that you don't even read, then what sense does it make anyways?

MONTAGNE: Thank you for joining us.

GAUDREAU: Well thanks. I appreciate it, and I hope you have a great day.

MONTAGNE: Jules Gaudreau is president of the National Association of Insurance and Financial Advisers. Transcript provided by NPR, Copyright NPR.