President Barack Obama will veto a House resolution designed to kill a Labor Department rule to raise investment-advice standards for retirement accounts, the White House said Wednesday.
The resolution is expected to come to the floor for a vote by the full House later this week after being approved April 21 on a party-line vote in the House Education and the Workforce Committee.
The rule-change requires financial advisers to act in the best interests of their clients in 401(k), individual retirement accounts and other qualified plans.
“It is essential that these critical protections go into effect,” the Office of Management and Budget said in a statement. “If the president were presented with [the resolution], he would veto the bill.”
The OMB said the regulation would protect investors from conflicted advice that results in their purchasing high-fee investment products that erode their savings. It also said that the rule had been “streamlined to reduce the compliance burden and ensure continued access to advice.”
Financial industry groups sharply disagreed and supported the resolution in letters sent to Congress on Tuesday and Wednesday.
Compliance "will be extremely complicated and expensive, resulting in increased consumer costs that will limit the services available to many modest-income investors,” eight industry interest groups wrote in a letter on Wednesday. “We strongly encourage Congress to use its authority to ensure the regulation, which includes a 208-page 'definition of fiduciary,' will not have an adverse impact on retirement savers.”
The letter was signed by the Financial Services Institute, the Securities Industry and Financial Markets Association, the Financial Services Roundtable and the U.S. Chamber of Commerce among others.
In a separate letter on Tuesday, the Investment Company Institute, which represents the mutual fund industry, said that the changes DOL made didn't go far enough.
“While the Department's final rule reflects a number of modifications, the basic structure of the proposed rule remains intact,” Paul Schott Stevens, ICI president and CEO wrote. “Like the proposed rule, the final rule imposes significant new liability through a complicated, back-door regulatory regime that will have the effect of limiting available advice options for many savers.”
The resolution is being advanced under the Congressional Review Act, which gives Congress 60 days after the release of a final rule to kill it. Supporters would have to garner two-thirds majorities in the House and Senate to overturn a veto.