Office	of	Regulations	and	Interpretations

Office	of	Exemption	Determinations

Employee	Benefits	Security	Administration	

U.S.	Department	of	Labor	

200	Constitution	Avenue,	NW

Washington,	DC 20210

July	9,	2015

Re:	Conflict	of	Interest	Rule,	RIN	1210-AB32,	Proposed	Best	Interest	Contract	

Exemption,	ZRIN:	1210-ZA25

Dear	Secretary	Perez:

Consumer	Action1 strongly	supports	the conflict	of	interest	rule proposed	by	the	

Department	of	Labor (DOL).	This	rule	would significantly	advance protections	for	

consumers	who	are	saving	for	retirement	by	requiring	that	financial	advisers	provide	

advice in	their	clients’	best	interest.

Without	such	a	rule,	many	retirement	savers	will	continue	to	risk	losing large	amounts	

of	money to	hidden	fees,	unsafe	investments	and	poor	advice.	Fiscal advisers	currently	

are	permitted	to	provide	financial	guidance	that	primarily	serves	their	own	self-interest,	

at	their	client’s	expense,	and	your	proposed	rule	would	correct	this.	

This	rule to	limit	conflicted	advice is	needed	now	more	than	ever,	as	consumers	can	no	

longer	rely	on	pensions—and	professional	pension	managers—to	be	responsible	for	

their retirement	savings	and	earnings. Today,	all	but	the	most	sophisticated	consumers	

are	reliant	on	whatever	advice (or sales	pitch) is	offered	by	financial	advisers	and	

brokers	as	they	struggle	to	make	important,	complex evaluations about	essential	

retirement	resources. Many	retirement	investors	realize	that	they	do	not	have	the	

knowledge	or	expertise	to	make	informed	retirement	decisions,	so	they	turn	to	financial	

professionals	for	help.	However, these	advisers	may	have	no	legal	obligation	to	serve	

their	clients’	best	interests. What’s	more,	most	consumers	cannot	distinguish	between

																																																												 1 Consumer	Action	has	been	a	champion	of	underrepresented	consumers	since	1971.	A	national,	nonprofit	501(c)3

organization,	Consumer	Action	focuses	on	financial	education	that	empowers	low	to	moderate	income	and	limitedEnglish-speaking	consumers	to	financially	prosper.	It	also	advocates	for	consumers	in	the	media	and	before	

lawmakers	to	advance	consumer	rights	and	promote	industry-wide	change	particularly	in	the	fields	of	credit,	banking,	

housing,	privacy,	insurance	and	utilities.	www.consumer-action.org.

By	providing	consumer	education	materials	in	multiple	languages,	a	free	national	complaint	hotline,	a	comprehensive	

website	(www.consumer-action.org)	and	annual	surveys	of	financial	and	consumer	services,	Consumer	Action	helps	

consumers	assert	their	rights	in	the	marketplace	and	make	financially	savvy	choices.	Nearly	8,000	community	and	

grassroots	organizations	benefit	annually	from	its	extensive	outreach	programs,	training	materials,	and	support.
qualified	financial	professionals and	people	without	the	necessary	expertise.	Consumers	

should	not	have	to	be	able	to	interpret	the	difference	in	order	to	receive	advice	that	is	

in	their	best	interest.

Without	a	fiduciary	duty,	financial	advisers	may steer	consumers	into	costly,	high-risk	

investments	that	drain clients’	hard-earned	savings	and	maximize	their	own	profits.	

While	many	advisers	do serve	their	clients’	interests,	compensation	and company	profit	

expectations	can	get	in	the	way.	If	an	adviser	is	paid	much	higher	commissions	for	one	

product	vs.	another, it’s	little	surprise	that	some choose	to	pad	their	own	pockets,	

rather	than	consider	their clients’	needs. The	DOL	proposed	rule	would	solve	this	

dilemma	by	imposing	a	legal	duty	on	financial	advisers	to	put	their	clients’	interests first.	

When	financial	advisers	prioritize their	own	interests,	the	cost	to	retirement	savers	can	

drain	critical	funds	slowly	but	steadily	over	time. The	DOL’s	own	analysis	estimates	that	

a	retirement	saver	who	rolls	money	out	of	a	401(k)	plan	and	into	an	IRA, based	on	

conflicted	advice, can	expect	to	lose	12	to	24	percent	of	the	value	of	his	or	her	savings	

over	30	years. These	are	funds	that	people	in	need	of	retirement	security	cannot	afford	

to	lose.

The	harm	that	consumers	suffer	as	a	result	of	conflicts	of	interest	can	have	profound	

effects	on	how	they’ll	spend	their	retirement,	including	where	they’ll	be	able	to	live,	

what	they’ll	be	able	to	afford	to	eat,	and	whether	they	will	be	able	to	be	self-sufficient.	

If	consumers	have	fewer	savings	during	retirement	because	of	poor	advice	and	selfcentered incentives,	they	may	become	more	dependent	on	state	and	federal	programs	

to	cover	their	shortfall,	which	disadvantages	all	taxpayers.

The	DOL’s	proposed	rule	will	help investors with	smaller	retirement	accounts	who	can	

least	afford	to	lose	earnings	to	unnecessarily	high	commissions	and	fees	and	

inappropriate	account	products. The	proposed	rule	still	permits	advisers	to	collect	

commissions	while	making	financial	recommendations	that	best	suit	their	clients’	

interests. Consumers	would	also	benefit	by	receiving	important	disclosures	showing	

savers	how	much	they	are	paying	for	the	products their	adviser	recommends.	If	financial	

firms	or	advisers	breach	any	of	the	contractual	provisions,	retirement	savers	would also	

be	able	to	hold	them	liable	for	any	losses	that	resulted	from	the	breach.

We	would	add	one	important	recommendation	to improving	the	rule:	Ban mandatory	

arbitration	clauses	in	investment	contracts.	Arbitration	should	be	a	tool	that	is	used	

voluntarily	when	it	suits	both	parties	in	a	dispute,	without	stripping	investors	of	their	

right	to	a trial	by judge	or	jury. Binding,	mandatory	arbitration	is	an	opaque,	unfair	

process	that	benefits	the	brokerage	industry,	not	retail	investors.

We	urge	the	DOL to	implement	this	common	sense	rule	to	help	protect	consumers’	

retirement	savings	from	expensive,	unnecessary	and	damaging	fees	and	risks.

Sincerely,

Linda	Sherry

Director,	National	Priorities

2