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Middle-class IRA holders concerned about proposed DOL rule impacting retirement savings

Brian Anderson

WASHINGTON, D.C. – A wide swath of middle-income Americans are concerned about the potential outcomes that the Department of Labor’s proposed conflict of interest rule will have on their retirement preparation, according to a new study of more than 1,000 middle-class IRA holders.

Of particular concern for IRA holders is the significant impact the proposed rule could have on access to, and choice of, retirement products, with the potential creation of a two-tiered system for the provision of retirement services, where only wealthy investors get the best retirement advice.

The findings, which come from a new survey by Global Strategy Group, show that 86% of IRA holders are concerned that the proposed DOL rule may cause them to lose access to a personal financial advisor in exchange for automated “robo-advisor” advice. When asked to choose between advice from a human financial advisor or a computer, IRA holders say they are more comfortable with a human financial advisor (65%) than a computer (35%).

More than 75% of IRA holders are overwhelmingly satisfied with their financial advisors and have great confidence in the advice they are receiving. The overwhelming majority say the path forward is for the Department of Labor (DOL) to work with the Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) to ensure consistent standards across regulators.

“This survey demonstrates that Americans value their relationships with their financial advisors, have confidence in the advice they’ve been receiving and do not want the government to interfere with how they access the help they need,” said Francis Creighton, Financial Services Roundtable (FSR) Executive Vice President of Government Affairs. “People value individualized, professional advice to help them plan for and stay on track for retirement. Especially during stressful periods of market volatility like we are currently experiencing, the government needs to protect this retirement advice, not make it more difficult to access.”


Recommended changes to DOL proposed rule

Retirement security is one of the most significant challenges facing the country. FSR appreciates that the DOL recognizes the need for solutions to this challenge. FSR encourages the DOL to respect the concerns of IRA holders and consider significant changes to the proposed rule to preserve the robust choice of products, advice and services currently available to retirement savers. More information on FSR’s position can be found here.

Here are some of the key findings of the survey:


Views of financial advisors are very positive

Customers like their advisors, believe advisors put their customers’ best interest first:

• Of those IRA holders who have access to and have sought advice from a financial advisor, nine-in-10 (92%) say they are satisfied with the financial advice they have received.

• Moreover, a broad majority of all IRA holders are confident that a financial advisor will provide advice that is in the best interest of their client. Among those with access to a dedicated financial advisor, 97% say they are confident that a financial advisor would provide advice that is in the best interest of their client, including 63% who are very confident.


Customers want to talk to humans more than computers

When asked to choose between advice from a human financial advisor or a computer, IRA holders say they are more comfortable with a human financial advisor (65%) than a computer (35%).

• This sentiment is particularly strong among those who describe themselves as “not financially literate” and those who are retired – 81% and 77% respectively say they are more comfortable with advice from a human than advice from a computer.


Vast majority of IRA holders concerned by the potential implications of the DOL Rule

Retirement savers are concerned that the proposed rule will limit choice and access to financial advice:

• A clear majority of middle-class IRA holders find every potential implication of the DOL rule concerning. 80% or more find each possible outcome concerning and a majority of IRA holders find nearly all implications very concerning to them.

• Limits on access, choice, and education are among the most concerning potential outcomes. While nearly all find these concerning, at least three-in-five (60% or more) find these outcomes very concerning.


The potential disproportionate negative impact on middle-class Americans is also among the most concerning outcomes

• When told that middle-class Americans may lose access to a personal financial advisor in exchange for automated advice, 86% say they find this concerning with a majority (58%) who say they find this very concerning.

• This concern extends to the financial advice advantage the wealthy will potentially gain if the rule is implemented in its current form. 86% say that the wealthy getting better advice than middle-class Americans is concerning to them, including a majority (56%) who say this is very concerning to them.

What IRA holders want: Choice, education, and advice are seen as more helpful than additional regulation

Rather than more rules and reduced or unequal access to retirement services, consumers want more education and empowerment.

Access to more retirement options, education, and a financial advisor are all seen as helpful for people looking to save for retirement. That vast majority of IRA holders said each of the following would be helpful for those looking to save for retirement:

• More opportunities to save for retirement (96%)

• More access to information about various savings options (94%)

• Access to additional education about retirement savings (93%)

• Access to a financial advisor (84%)

In head-to-head matchups, by a margin of 4-to-1, IRA holders say better access to a wide variety of opportunities to save for retirement (79%) and education and advice about retirement savings options (80%) are more helpful for people looking to save for retirement than additional regulation of financial advisors and retirement products (21%/20% respectively).


IRA holders say DOL should work with the SEC and FINRA

There is strong support for the DOL to work with the SEC and FINRA on protecting the best interest of retirement savers.Nearly four-in-five IRA holders (78%) support the Department of Labor working with the SEC and FINRA to ensure their proposed rule does not contradict existing rules already in place from these regulatory authorities.

• This support is broad and cuts across party lines with majorities of Democrats (87%), independents (82%) and Republicans (68%) supporting the DOL working with the SEC and FINRA to harmonize standards.


About this survey: This survey was conducted by Global Strategy Group among 1,004 U.S. middle class IRA holders online between August 3 and August 6, 2015. In order to participate in the survey, respondents were required to hold an IRA, have a household income of $150,000 or less, and have less than $100,000 in their IRA(s). Special care was taken to ensure the sample is representative of IRA holders by gender, age, race/ethnicity, education, household income and IRA account balance based on known data.

About FSR: The Financial Services Roundtable represents the largest integrated financial services companies providing banking, insurance, payment and investment products and services to the American consumer. Member companies participate through the Chief Executive Officer and other senior executives nominated by the CEO. FSR member companies provide fuel for America’s economic engine, accounting for $92.7 trillion in managed assets, $1.2 trillion in revenue, and 2.3 million jobs. Learn more at FSRoundtable.org.



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