In April 2015, the U.S. Department of Labor (DoL) proposed new regulations regarding conflicts of interest in retirement plans and the definition of investment advice. Among the most important objectives of the proposed regulations are to:
- Strengthen the responsibility of retirement plans and retirement advisers to act in their clients' best interest, and
- Extend fiduciary requirements to IRA providers and to rollovers between IRA and 401(k) plans.
To evaluate each firm's position on the proposal, I read their official submissions to the DoL and looked for news or commentary on the firm's website. The submissions ranged from brief to profuse, making it difficult to compare, for example, one that was limited but vaguely supportive versus another that detailed its clear support in some areas and constructive opposition in others. I've opted, therefore, to judge them by comparison to comments submitted by Alicia H. Munnell and Anthony Webb of the Center for Retirement Research at Boston College. The comments of Munnell and Webb are both strongly supportive of the DoL proposal and lucidly explained. I recommend reading them.
In the list below, I've ordered the firms from best to worst according to my own judgment of the degree to which they conformed to the Munnell-Webb analysis. I also gave a firm credit for disclosing its position on its own website, in a manner retail investors would could easily find and understand.
- Betterment submitted strongly supportive comments, covering certain aspects of the proposal applicable to individual investors and 401(k) plans. They fully disclosed the firm's position on their own website.
- Wealthfront submitted very limited comments, mainly supporting low-fee automated services for small investors. They fully disclosed the firm's position on their own website.
- Fidelity submitted modest comments here and here, requesting revision of some aspects of the DoL proposal, largely on grounds of compliance cost and administrative complexity, grounds that Munnell and Webb explicitly reject. Fidelity did not disclose any information about the DoL proposal or the firm's position anywhere on their retail client website.
- Charles Schwab submitted extensive comments here and here. They supported the intent and some specifics of the DoL proposal, and constructively offered clarifications, while conforming mostly but not fully to the main points advocated by Munnell and Webb. Schwab did not disclose any information about the DoL proposal or the firm's position anywhere on their retail client website.
- Vanguard submitted extensive comments here, here, and here. They responded constructively when in opposition but rejected some significant constraints favored by Munnell and Webb. Vanguard did not disclose any information about the DoL proposal or the firm's position anywhere on their retail client website.
- TIAA-CREF submitted very extensive comments here and some follow-on comments here, agreeing in concept with the need for clearer fiduciary standards but opposing many significant constraints favored by Munnell and Webb. TIAA-CREF posted an article about the DoL proposal on the firm's main website but disclosed no information about the firm's position.
- BlackRock submitted extensive comments here. They objected to the DoL proposal, including many significant constraints favored by Munnell and Webb, yet they allowed a generally favorable blog-post on the website of their subsidiary, Future Advisor, in conflict with the parent firm's strongly opposing comments to the DoL.
A full appreciation of the proposed standard requires some willingness to delve into legal and financial technicalities. That said, if you want to learn more, here are some ways to get started:
- Pensions & Investments, a publication for executives who manage pension accounts and institutional investments, reviewed the DoL proposal in August 2015, explaining who's a supporter, who's not, and why.
- The Board of Certified Financial Planners and the Financial Planning Coalition have articulated their reasons for being strong supporters.
- A complete list of the public comments is published on the DoL website. Using control-F in your browser, you can search for the comments of a particular firm or individual.
Disclaimer: Nothing here is intended as an endorsement or solicitation of any security or product from any particular firm or financial adviser. Please read our full disclosures.