A vote by the Financial Services Committee of the U.S. House of Representatives grabbed financial media headlines Thursday, unfolding largely on partisan lines and raising the possibility President Obama could eventually be forced to veto legislation aimed at halting the Department of Labor’s (DOL) fiduciary rulemaking.
Given President Obama’s strong top-down push for employee benefits reform and a friendlier Senate, conventional wisdom says H.R. 1090 probably won’t get much further.
Still, it was an important move and sympathetic lawmakers handed enough support for H.R. 1090, known as the Retail Investor Protection Act, to push the bill out of committee. As approved, the bill would essentially halt the Department of Labor’s fiduciary rulemaking efforts to strengthen conflict of interest protections for retirement savers under the Employee Retirement Income Security Act (ERISA) until such time as the Securities and Exchange Commission (SEC) progressed in its own fiduciary reform applying generally to brokers and producing advisers.
The vote was clearly anticipated by some industry groups, who shared commentary almost as soon as the yeas and nays were tallied. For example, Consumer Federation of America (CFA) Director of Investor Protection Barbara Roper suggested “today’s vote forces us to choose between seeing the glass as half-full or half-empty. Certainly it is disappointing that a majority of Committee members voted in favor of a bill that would call a halt to regulatory efforts to ensure that all retirement savers get advice that serves their best interests.”
According to Roper, “the pretense that this is being done to protect retail investors is particularly galling.” On the other hand, Roper said, all but one of the Democrats on the committee voted against the measure, which she said “once claimed strong bipartisan support.”
NEXT: Industry still split
on likely fiduciary outcome
“Clearly, Democratic support for the Department of Labor rulemaking has solidified as members have recognized that the rule that has been proposed is balanced, that the Department is open to making reasonable changes to make the rule more flexible and streamlined, and that retirement savers cannot afford to wait for an SEC rulemaking that may never come,” she said. “We are grateful to the many members of the Committee who voiced strong support for the DOL effort.”
The Financial Planning Coalition, comprised of the CFP Board, the Financial Planning Association and the National Association of Personal Financial Advisors, also issued a statement following the House Financial Services Committee’s vote in support of H.R. 1090. The coalition doesn’t mince words, suggesting the legislation is designed to do little more than impede the DOL's needed fiduciary rulemaking.
“The need for a strengthened fiduciary rule under ERISA is long overdue,” the Coalition suggests. “As H.R. 1090 heads to the House floor, we urge Congress not to intervene—through this bill or any other vehicle—and to let the DOL do its job and protect retirement investors. As recognized by 25 members of the House Financial Services Committee, the DOL is the expert agency charged with implementing fiduciary-level advice for tax-preferred retirement assets under ERISA. That fiduciary principle—wisely recognized by Congress in 1974—is even more important in today’s retirement marketplace in which retirement investors are largely responsible for their own retirement savings.”
Of course, for every group pushing back on H.R. 1090, another could be found to support it. This week at the PLANADVISER National Conference, attendees widely disagreed with the DOL’s fiduciary rulemaking effort, and said they would support efforts to halt it, legislative or otherwise.