Opposition to a Department of Labor proposal designed to minimize broker conflicts of interest surrounding retirement accounts is once again becoming bipartisan, despite strong White House backing for the measure.
The DOL rule was released earlier this month, with a July 6 deadline for comment. The financial industry, which killed a similar proposal in 2011, immediately pushed for a deadline extension, saying more time was required to digest the proposal that runs hundreds of pages.
The effort looked like an attempt to delay the rule to death, something the industry and Republicans would welcome. But now Sen. Jon Tester, D-Mont.,
also wants to extend the comment period.
“This is a complex rule that has far-reaching impacts, so Sen. Tester believes we need to ensure folks have time to weigh in,” Dave Kuntz, Mr. Tester's spokesman, wrote in an email.
A DOL spokesman declined to comment on whether the agency would extend the comment deadline. After the 75-day comment period, DOL will hold a public hearing. There will be another comment period after the hearing transcript is published.
President Barack Obama gave a hearty endorsement to the DOL proposal, calling it crucial to protecting workers and retirees from investment advice that benefits brokers more than it does them. He cited it as a key part of his “middle class economics” agenda.
With the White House backing, Democrats mostly fell in line, even though many had opposed the earlier version of the rule.
But on April 21, Mr. Tester and several other Democratic senators
met with Labor Secretary Thomas Perez to express concerns that the “rule will reduce options for Main Street investors and limit retirement advice for middle-class families,” Mr. Kuntz said.
That argument echoes industry criticism of the rule. The senators also made a point that brokerage and insurance firms have voiced: the rhetoric from proponents of the rule unfairly portrays brokers as preying on their clients.
The rule would require them to act in their clients' best interests, a bar that investment advisers already meet. Currently, brokers must offer investment products that are suitable for their clients but they can carry higher fees than other products.
Sen. Joe Donnelly, D-Ind., attended the April 21 meeting. He said that brokers are looking out for their clients.
“They have no desire to go to the wrong product,” Mr. Donnelly said in an interview. “They're our friends. They're our neighbors. We go to church with them, and their reputation is dependent on trying to make sure that everyone in the town they live in, everyone in the community they represent, has a chance to retire with dignity.”
Mr. Donnelly added: “There are one or two everywhere that can go sideways. Overall, these men and women sweat the details every single day to try to get it right for their clients.”
Mr. Donnelly and Mr. Tester, who are both on the Senate Banking Committee, did not say whether they're planning to introduce legislation to stop the DOL rule. But the fact that they're raising concerns make the politics of the DOL rule more interesting – and complicated.
