A bipartisan group of Congress members expressed their concerns to the Department of Labor over its proposed fiduciary rule.
The proposal includes changes to the existing regulatory framework governing the conduct of financial professionals who provide personalized investment advice to retirement savers. The proposed changes would expand the definition of who a fiduciary is and make changes to the role of a fiduciary, like requiring them to act in the best interests of clients.
The lawmakers — Reps. Ann Wagner (R-MO), French Hill (R-AR), and David Scott (D-GA) – sent a letter to DOL leadership, outlining their concerns that the fiduciary rule would make it more expensive to invest for retirement and limit access to financial retirement products. They also said it has no place in a competitive financial services system that encourages long-term financial growth.
“In moving forward with this proposal, DOL has unreasonably dismissed the extensive research and real world experience decisively demonstrating the 2016 DOL fiduciary rule significantly harmed lower- and middle-income workers before being vacated in federal court. The proposed fiduciary definition goes further than the 2016 fiduciary rule that was invalidated by a federal appeals court ruling,” the lawmakers wrote to DOL leaders.
They also said it could cause a large number of financial professionals to switch to providing service as investment advisers, rather than as insurance agents or registered representatives of a broker-dealer. Investment advisers, they noted, charge ongoing advisory fees and impose account minimums that low- and moderate-income workers and retirees cannot afford. As a result, they would lose access to any financial professional.
“A study of the 2016 fiduciary rule found that more than 10 million smaller retirement account owners lost the ability to work with financial professionals. A more recent analysis found that if DOL adopts a new rule that is similar to the 2016 rule, the retirement savings of 2.7 million individuals with incomes below $100,000 would plummet by $140 billion over ten years. The analysis also found that people of color, particularly Black and Latino retirement account owners would be among the hardest hit, increasing the racial wealth gap by 20 percent,” they wrote.
They ended the missive by urging the DOL to withdraw and cease efforts to adopt the proposed rule and accompanying amendments.