Vanguard, the fund company that oversees more than $3 trillionin assets and that has built its brand largely on itslow-cost, passively managed indexed mutualfunds, has been cited by Labor Secretary Thomas Perezin public comments and in testimony before Congress as a companythat operates with its clients’ best interests in mind.

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On one occasion, Perez quoted Vanguard founder Jack Bogle in aninterview with CNBC in which he defended Labor’s initiative tocraft a new fiduciary standard for all retirement advisors.

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“When you put your customers first, that’s not only good for thecustomer, it’s good for business,” said Perez, quoting Bogle.

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But the fund company that may be the standard bearer for theDOL’s vision for the retirement advisoryindustry going forward has real problems with theagency’s proposed conflict of interest rule.

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Specifically, the proposal could “curtail access to importanteducational and advisory services to (retirement) plans,participants and IRA investors,” wrote Martha King, managingdirector for Vanguard’s institutional investor group, in a commentletter to the DOL.

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“If the Department defines investment advice too broadly, theattendant costs of a fiduciary level of service are likely toresult in increased costs to retirement investors for basicinvestment counseling or even the termination of important investorservices,” added King.

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As proposed, the rule would classify common investmentconversations and “generic communications” as fiduciary advice.

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The due diligence requirements under the proposal’s BestInterest Contract Exemptions could impose cost increases onproviders, and that could result in the elimination of services,even in instances where clients have no reasonable expectation of afiduciary level of care, said King.

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King said Vanguard wants to see a substantially simplified BestInterest Contract Exemptions, a more specific definition offiduciary advice, and clearer carve outs for investor education.

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Only individualized communications should qualify as investmentadvice, thinks Vanguard.

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And the question of how investments are valued should be a partof a separate rulemaking process. Under the proposal, the DOL seeksto clarify the role of fiduciaries that value private companies inESOP offerings.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.