NEW YORK (Reuters) - Millions of investors would be dropped by their financial advisers if the U.S. Department of Labor's proposal is adopted requiring brokers who offer retirement advice to enter into "best interest" contracts, the head of Raymond James Financial said Thursday.
The DOL rule, proposed in mid-April, is intended to protect investors from being steered into high-fee products by retirement advisers who, the Labor Department said, may put profit-making ahead of the client's interests.
The new standard would hold brokers who offer retirement account advice to a higher "fiduciary" standard of putting their customers' interests first. They currently must recommend investments that are "suitable” for investors.
But industry groups have warned that a sweeping rule change could limit retirement products available and force firms to invest in disclosure and take on more liability.
"Honestly, I believe (the proposal) will leave millions of people without the advice they're getting today," Paul Reilly, chief executive officer of the independent brokerage Raymond James Financial, which could be affected by the rule if it is passed, told analysts on a conference call.
The rule would drive the burden of compliance too high for many firms to rationalize working with some accounts, said Paul Shoukry, vice president of finance and investor relations at Raymond James.
Reilly is not alone in speaking out against the rule, but other Wall Street leaders' whose brokerages could be impacted by the rules have been more subdued in their comments.
Morgan Stanley Chief Financial Officer Ruth Porat said Monday on an earnings call echoed part of Reilly's comments saying that the rule would likely to push compliance costs higher. But, she said, it wouldn't have "a major impact on the firm's business."
Charles Schwab Corp Chief Executive Walt Bettinger said on a conference call with analysts on April 16 that his company is better prepared to deal with a higher standard of care because it services thousands of fee-based investment advisers and brokers who already meet the proposed fiduciary standard.
The DOL began a 75-day comment period and will a host public hearing. On Tuesday, a coalition of 16 trade groups including the Securities Industry and Financial Markets Association (SIFMA) submitted a letter to the department requesting the comment period be extended to 120 days to allow more discussion.
Additional reporting by Jed Horowitz; Editing by Cynthia Osterman