Plenty of retirement investment advisers already put their customer’s interests first, proving that it is possible to provide advice that is in the best interest of all kinds of savers — including those with small balances — while running a successful business. And many low-cost options are already available, with more becoming available due in part to advancements in financial technology. But backdoor payments, complicated and hidden fees often buried in fine print, and supposedly free advice that is conflicted may make it difficult for new entrants to the advice marketplace providing quality, low-cost, unbiased advice to compete. The rule and the exemptions level the playing field for all the firms to prevent competitive disadvantages for those that provide quality, low-cost, unbiased advice.
The Department of Labor is not prohibiting common compensation practices, such as commissions and revenue sharing. Instead, the regulatory package gives firms the flexibility to figure out how to structure their business in order to provide quality advice that is in their clients’ best interest. Given that the Department is not banning commissions or other common types of compensation, but rather is requiring advisers to provide advice that is in their client’s best interest, the rule and exemptions as crafted, preserve and expand access to good retirement advice for small savers that helps them lay the groundwork for a secure retirement.