House Hearing Spotlights Trump Account Fault Lines  

Congressional scrutiny of the administration of President Donald Trump’s new investment accounts for children expanded Thursday, with lawmakers and industry witnesses debating everything from eligible investment options to the role of companies administering the program, which launches next week.

During a House Financial Services Subcommittee on Capital Markets hearing examining the future of retail investing, Democrats raised concerns about the need for investor protections and the administration’s decision to select the Bank of New York Mellon Corp. as the program’s financial agent and Robinhood Markets Inc. as its brokerage and initial trustee.

At the same time, industry representatives urged policymakers to clarify how the accounts will operate over the long term and argued the investment menu should eventually extend beyond passive U.S. equity index funds.

The discussion underscored that while Trump Accounts are nearing launch, key policy questions remain unresolved, including what investments will ultimately be available, how the accounts can be rolled into other financial institutions, and what safeguards should govern accounts intended to build long-term savings for children.

The published guidance from the Department of Labor states that investments in the accounts are restricted to broad U.S. equity index funds and exchange-traded funds with fees not more than 1 basis point of the balance and that withdrawals are not allowed until the child turns 18, at which point the account converts to a traditional individual retirement account. However, many industry professionals have called both for more clarity and for more diversification of the investment options.

Questioning Robinhood, Investments

Representative Sean Casten, D-Illinois, also questioned the administration’s selection of Robinhood.

Casten later pressed hearing witness Natalia Renta, an associate director for corporate governance and power at Americans for Financial Reform, on how children participating in the program could be protected if investment restrictions change over time.

“We definitely share your concerns, because Robinhood’s business model is based on gamification of investments, and they’re being trusted with setting up children for long-term financial success,” Renta said. While current rules limit Trump Accounts to low-cost index funds, she added that “those restrictions, it seems, will be lifted.”

Investment industry witnesses, however, focused less on the program’s administrator than on how the accounts should evolve.

Jody Jonsson, vice chair of Capital Group, warned against permanently limiting the accounts to passive investments. Mandating that Trump Accounts invest only in passive products, she said, “would further exacerbate the problems … where markets lose the ability to have price discovery.”

Tom Quaadman, chief of government affairs and public policy at the Investment Company Institute, said his organization has been working with officials from the Department of the Treasury and the administration on unresolved implementation issues, including future rollover rules.

“We’ve had extensive discussions with the Treasury Department, with the administration, on rollover issues,” Quaadman said, adding that the discussions also encompass broader retirement policy, following a recent executive order on expanding and easing access to individual retirement accounts.

Quaadman also signaled that many in the industry want the administration to eventually broaden the investment options available through the accounts.

“Our understanding is this can only be in index funds—low-cost, prudent, conservative stuff,” he said in response to questions about Treasury guidance. “We would like to see an increased basket of investment opportunities there.”