Group asks judge to block Obama’s financial adviser rule

A trade group is urging a federal judge to block the Labor Department’s “fiduciary rule” from taking effect next April.

The National Association of Fixed Annuities (NAFA), an insurance industry group, is suing the Labor Department over the rule that forces investment advisers to act solely in their clients’ interest.

It’s intended to keep them from pushing clients into riskier investments that can lead to more profit for the advisers. But critics say new regulations and costs will make financial advice harder to get for many Americans.

{mosads}During a hearing in the D.C. District Court on Thursday, NAFA attorney Philip Bartz told Judge Randolph Moss that Labor Secretary Tom Perez and the Labor Department exceeded their regulatory authority in issuing the rule.

He said the agency too broadly defined “fiduciary” to include insurance and insurance agents when Congress intended the term to only cover individuals who provide investment advice for a fee.

“The rule is impossible to comply with absent an entire restructuring of the distribution system,” Bartz argued.

Moss questioned whether NAFA had standing to bring the case forward.

“Were your members harmed by this overly broad definition?” he asked.

The Labor Department did provide NAFA an exemption, Bartz said, but there were too many conditions attached.

The department argued it had no choice but to change the definition of fiduciary to respond to a changing retirement market, where employer pension plans have given way to more individual retirement accounts and 401(k) plans.

“Retirement products have become more and more complex so individuals are seeking advice,” said the agency’s attorney Emily Newton.

In its request for a preliminary injunction, NAFA said the rule would have a devastating effect on the fixed annuity industry.

“If the rule is allowed to go into effect, and especially if it is allowed to become applicable on the schedule set forth by the department, in the weeks and months ahead, jobs will be lost, careers will be altered, firms will close, and vast resources will be invested in what will likely prove to be an unnecessary effort to comply with a rule that should not be allowed to stand,” the group said in court documents.