House members poised to introduce bill to replace DOL fiduciary rule

Lawmakers released what they called “legislative principles” for retirement advisers, including acting in clients' best interests

Nov 5, 2015 @ 5:26 pm

By Mark Schoeff Jr.

A bipartisan group of House members is working on a bill that would offer an alternative to a pending Labor Department proposal to raise investment advice standards for retirement accounts.

The lawmakers released what they called “legislative principles” Thursday that will be reflected in the measure.

The principles include requiring advisers to work in their clients' best interests; providing “clear, simple and relevant disclosure of material conflicts,” including compensation and fees; and preserving proprietary products, commission-based sales and annuities.

The authors of the bill — Reps. Peter Roskam, R-Ill., Richard Neal, D-Mass., Phil Roe, R-Tenn., and Michelle Lujan Grisham, D-N.M. — said they are concerned the DOL rule, which is designed to reduce advisers' conflicts of interest, would have “unintended negative consequences” for people with modest assets.

“We acknowledge the Department of Labor's pledge to change aspects of the regulation before final issuance, but feel more must be done to adequately address concerns about the rule's impact on the ability of low- and middle-class families to save for retirement,” the legislators said in a joint statement.

They added, “If a final rule has flaws, damage can be done upon the rule's release due to the immediate changes the retirement savings industry would have to make and the likelihood that those changes could limit access to services and education for those saving to retire.”

A DOL spokesperson was not immediately available for comment.

It's not clear when the bill will be introduced or whether it will require the DOL to halt the rule. Mr. Neal and Ms. Grisham were among the nearly united Democratic caucus that voted against a bill last week that would stop the DOL proposal in its tracks.

Barbara Roper, director of investor protection at the Consumer Federation of America and an advocate for the rule, said it already meets the standards outlined by the lawmakers, and that their principles are short on details. She criticized the legislative framework for emphasizing disclosure rather than mitigation of conflicts, and not mentioning enforcement mechanisms.

“It sounds to me as though they are simply doing industry bidding by creating a best-interest standard in name only,” Ms. Roper wrote in an email. “That has nothing to do with protecting small savers. It is all about protecting industry's bottom line.”

The DOL proposal was released in April with White House backing and has gone through two comment periods and four days of hearings. A final rule is expected early next year so it can be finalized before the Obama administration leaves office.

Proponents say advice standards must be raised in order to protect investors from high-fee products that erode their retirement savings. The industry argues the rule will significantly increase liability risk and regulatory costs for brokers, making advice more expensive to give and receive.

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