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.

fiduciary, department of labor, securities and exchange commission, ann wagner, phyllis borzi
+ Zoom
Yea or Nay: Rep. Ann Wagner's bill that would slow or even stop the Labor Department's fiduciary rule is up for a vote this week.

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.

A KILL BILL?

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The rule was withdrawn after a fierce backlash from the financial industry, which argued that it would subject IRAs to fiduciary duty for the first time — curtailing broker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.”

CONFLICTING RULES

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.”

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

May 23

Webcast

Active Isn't Dead: The Case for Refining Your Clients' Portfolios

There is a myth that active investment managers cannot outperform their benchmarks. But the death of active investing has been greatly exaggerated.The economic climate in the past eight years has generally been conducive for U.S.... Learn more

Accepted for 1 CE Credit from the CFP Board. Approved by IMCA for 1 CIMA®/CIMC®/CPWA® CE credit. Approved for 1 CFA Credit.

Latest news & opinion

DOL Fiduciary Rule: What you need to know about Acosta's decision

Labor Secretary Alexander Acosta confirmed that the agency's fiduciary rule will become applicable on June 9. Find out what advisers and firms should know when it goes into effect.

Acosta declines to extend delay of DOL fiduciary rule

Labor Secretary finds no legal basis to delay implementation; rule to become applicable June 9

Phyllis Borzi says opponents of DOL fiduciary rule face uphill climb to further delay or dilute it

Former assistant Labor secretary who crafted the rule says President Trump won't be able to get rid of it simply because he doesn't like it.

Advisers go on the offensive, getting clients ready for the next market correction

Some proactive planners are spelling out for clients the impact of a 10% or 20% correction.

Shrinking talent pool puts strain on advisory firms

Attrition, cuts in training programs and new competition make it difficult to fill job openings

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print