In an open comment letter submitted to the Securities and Exchange Commission (SEC), the Insured Retirement Institute (IRI) stresses the need for any investment industry conflict of interest reforms to be well-coordinated among regulators—and to keep in mind the crucial differences that exist between annuities and equity investments.

For context, in June of this year the SEC published a request for public comment on standards of conduct applicable to investment advisers and broker/dealers when they provide investment advice to retail and retirement investors. The request was among the first actions taken by the SEC under the new leadership of Chair Jay Clayton, and was interpreted by many to represent the SEC jumping in to play a direct role in the ongoing work at the Department of Labor to revamp the fiduciary definition under the Employee Retirement Income Security Act (ERISA).

At a high level, IRI argues the work completed so far by the Department of Labor (DOL) on the Obama-era fiduciary rule reforms must be skeptically reviewed by the new administration. According to IRI, major adjustments are needed to the DOL rulemaking in order for it to be considered workable by the advocacy group’s members. Furthermore, IRI argues the DOL has over-stepped the bounds of its authority and is currently engaged in work that would be best left to the SEC.

“The new standards should not require financial professionals to completely disregard their own interests or recommend only the ‘best’ or ‘cheapest’ product,” IRI argues. “The standard should only apply to recommendations that would reasonably be viewed as a call to take action and are sufficiently individualized.”

Beyond these arguments, IRI says DOL and SEC should work together to create advisory industry standards that do not impair the ability of firms and financial professionals to market, advertise and sell their products. In multiple sections of its letter, IRI goes so far as to argue the whole DOL rulemaking process that has unfolded so far should be tossed: “The DOL rule is causing consumers to lose access to valuable retirement products and services, and therefore should not serve as the starting point for rulemaking by the commission.…The Commission should collaborate with the DOL, FINRA, and the state insurance and securities regulators to develop a clear and consistent best interest standard.”

Investors are generally capable of looking out for their own interests and should have freedom of access to shop the financial services marketplace for retirement income guarantees, IRI continues. “The SEC should preserve access to annuities and other valuable financial products and services by rejecting the DOL’s paternalistic view of individuals. A competitive product marketplace is clearly in the best interests of retirement investors,” IRI says.

IRI goes on to state that investors should “always have the right to choose” their own financial professional: “Regulations should not favor or disfavor financial professionals based on the nature of their compensation (commission or fee) or the scope of their product offerings (proprietary products or limited product shelf).”

In terms of what it would like to see SEC accomplish, IRI shares the following list: “Conflicts should be eliminated when reasonably possibly (without requiring levelized compensation); unavoidable conflicts should be managed through mitigation and disclosure; disclosures should help investors understand what they are paying and what they are getting for their money; SEC should only propose new disclosure requirements if it identifies a gap in existing disclosure requirements; and the commission should adopt a rule to allow use of a summary prospectus for variable annuities to help investors better understand these products.”

Beyond this, IRI argues the SEC, if it does implement any new rules, should provide true grandfathering: “Any new standard of conduct should not retroactively apply to pre-existing accounts or transactions. The commission should provide a flexible regulatory environment to facilitate and encourage innovation, but should not pick winners and losers. The best interest standard should not be interpreted or enforced through private litigation; regulators should control interpretation of the standard, and enforcement should be handled through regulatory actions or arbitration.”

IRI’s full comment letter can be downloaded here.