Bill to slow Labor Department fiduciary-duty rule headed for House vote

Concern over cost of doing business for advisers, lack of choice for consumers

Oct 28, 2013 @ 10:16 am

By Mark Schoeff Jr.

The House is scheduled to vote this week on legislation that would slow or even kill a Labor Department regulation to strengthen investment advice rules governing retirement plans.

The measure, written by Rep. Ann Wagner, R-Mo., would prohibit the Labor Department from proposing the rule, which would expand the definition of “fiduciary” as it applies under federal retirement law, until 60 days after the Securities and Exchange Commission adopts a separate rule that would raise standards for brokers providing retail investment advice.

In addition, the bill would require the SEC to determine whether retail investors are harmed by the different advice standards governing investment advisers and brokers. Advisers must act in the best interests of their clients, while brokers adhere to a less stringent suitability standard when selling financial products.

The measure was approved in June by the House Financial Services Committee, 44-13 — a tally that included 13 Democrats.


Critics of the bill say that it could effectively kill the DOL rule because the SEC has not determined whether to proceed with its own regulation.

The DOL originally proposed its rule in 2010 to protect workers and retirees from conflicted investment advice as they build their nest eggs through 401(k) plans and individual retirement accounts.

The rule was withdrawn after a fierce backlash from the financial industry, which argued that it would subject IRAs to fiduciary duty for the first time — curtailing broker commissions and potentially driving them out of the market.

The DOL was scheduled to re-propose the rule this month, but it has been delayed.

In a video released Sunday, Ms. Wagner said that the DOL rule would “likely increase the cost of doing business for Main Street financial professionals and cut off access to financial advice for low- and middle-income families.”


Brian Graff, chief executive and executive director of the American Society of Pension Professionals and Actuaries, said that if the DOL and SEC don't coordinate their efforts, they could produce different rules for investment advice within the same portfolio.

“It's important that regulators tread very carefully so that we don't reduce access to advice or create rules that will make advice more confusing to investors, not less confusing,” Mr. Graff said Sunday on the sidelines of ASPPA's annual conference in National Harbor, Md. “We should focus more on disclosure and not on prohibiting this access.”

Assistant Labor Secretary Phyllis Borzi is the champion of the DOL rule. She has said that the measure will address IRAs but not prohibit commissions. Her goal is to hold investment advisers accountable.

“What I'm talking about is making sure the advice you give is primarily, overwhelmingly and unassailably the best plan for the client,” Ms. Borzi told an audience in September at a Financial Services Institute Inc. conference in Washington.

Ms. Borzi has been feeling heat from both sides of the aisle. Observers expect that 50 to 75 Democrats will vote for Ms. Wagner's bill.

Even though its passage in the House is assured, there doesn't appear to be any interest in the Senate for a similar version of the measure.

But even if the Senate doesn't act, the House vote will send a message, according to Mr. Graff.

“Everyone expects that the regulation is still going to come out next year,” he said. Ms. Wagner's “bill is intended to convey a concern.”


What do you think?

View comments

Recommended for you

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video


Big trends in RIA acquisition

Consolidation is continuing. Acquisitions and mergers are on the rise. Is there an AUM threshold that advisers need to reach for a practice to be viable? CapTrust's Rush Benton offers some perspective.

Latest news & opinion

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

PIABA accuses Finra of conflicts of interest

Public Investors Arbitration Bar Association report slams self-regulator over its picks for board of governors.

Betterment launches 'free' charitable-giving platform

Robo-software provider lets investors donate directly from their accounts, and will not charge charities with less than $1 million on the platform.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print