If Hillary Clinton is elected president, she likely will pick up where the Obama administration leaves off on a Labor Department proposal to change investment advice standards for retirement accounts.
In a proposal for financial reform released by her presidential campaign Thursday, the former secretary of state implicitly endorsed the proposed DOL rule.
A fact sheet lists guarding retirement savings as one of the steps Ms. Clinton would take to “protect consumers and investors from unfair and deceptive practices” by financial firms.
“Billions more [dollars] are drained from retirement accounts because of the high fees and conflicts of interest in the investment management industry,” a
Clinton campaign fact-sheet states. “[Ms.] Clinton would fight to protect honest and hardworking Americans from unfair and deceptive practices in the financial industry that are holding them back — and she will lay out specific proposals for doing so over the course of this campaign.”
A footnote in the fact sheet refers to a White House Council of Economic Advisers study that asserts that conflicted advice from brokers costs workers and retirees $17 billion annually in retirement savings. That figure has been hotly disputed by industry groups.
The reform plan Ms. Clinton laid out Thursday calls for reducing systemic risk in financial markets, strengthening regulation of risky financial products, imposing a high-frequency trading tax, prosecuting individuals for corporate violations of securities laws, increasing penalties for regulatory enforcement and bolstering funding for the Securities and Exchange Commission, among other policies.
The plan didn't go into detail about investment advice. But a favorable mention of the DOL rule near the end of the fact sheet puts Ms. Clinton on the same side of the issue as Sen. Elizabeth Warren, D-Mass., and other liberals pushing for the rule.
Greg Valliere, chief strategist at Horizon Investments, said Ms. Clinton is trying to fortify her left flank against the surprisingly strong campaign of Vermont Sen. Bernie Sanders, an independent competing for the Democratic presidential nomination.
“She feels she has to defuse the threat from [Mr.] Sanders,” Mr. Valliere said. “She's putting out a much more activist, left-wing platform than I would have guessed.”
The DOL rule, which was introduced in April with strong White House backing, has generated enormous controversy. The rule would require brokers to act in their clients' best interests when working with 401(k) and individual retirement accounts.
Proponents say it would curtail incentives for brokers to put clients in inappropriate, high-fee products. Critics say it would significantly increase liability risk and regulatory costs for brokers, making investment advice much more expensive to give and receive.
Financial industry groups are trying to get DOL to withdraw the rule, warning that it would force brokers to drop clients with modest assets. The rule could be finalized early next year.
Ms. Clinton “runs the risk of alienating a big chunk of the financial services industry,” Mr. Valliere said.
She maintains she's trying to help investors.
“To prevent irresponsible behavior on Wall Street from ever again devastating Main Street, we need more accountability, tougher rules and stronger enforcement,” Ms. Clinton said in a statement. “I have a plan to build on the progress we've made under President Obama and do just that.”
