House Democrats and Republications are teaming up to draft legislation that would create an alternative “best interest standard” for advisors to operate under when working with retirement accounts.
Concerned that the Department of Labor’s current fiduciary proposal may have unintended and potentially negative consequences, four members of the House Education and Workforce Committee plan to introduce bipartisan legislation before Thanksgiving that could preempt the Labor Department's finalized rule.
Phil Roe (R-Tenn.), Richard Neal (D-Mass.), Peter Roskam (R-Ill.) and Michelle Lujan Grisham (D-N.M.) said in a statement Thursday they plan to develop a bill that will encompass “a series of legislative principles” aimed at encouraging Americans to save for retirement and requiring retirement advisors to act in their clients’ best interests.
“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 lawmakers said in a joint statement released Thursday.
Among the key components of the proposed legislation is a mandate that retirement advisors provide “clear, simple, and relevant” disclosure of material conflicts, including compensation received and all investment fees working with clients saving for retirement.
The bipartisan group noted the new bill will include language requiring that public policies protect access to investment advice and education and should not deny individuals the “financial information they need to make informed decisions,” according to the statement.
Protecting investor choice, under the legislation, would extend to product choice as well. “Access to all investment services—such as proprietary products, commission-based sales, and guaranteed lifetime income—should be preserved in a way that does not pick winners and losers.”
“Our legislative proposal will ensure that all Americans have access to the financial advice they need to prepare for retirement, protect individuals from conflicted advice, and require advisors serve the best interests of retirement savers,” the House members said.
The Financial Services Institute—which has previously called the Labor Department’s proposal “unworkable”—supported Thursday’s measure, saying the industry association will continue to work with Congress on the issue.
“We have said all along the DOL needs to get this rule done right, not done fast,” David Bellaire, FSI’s executive vice president and general counsel, said in statement. “Members of Congress have not only the right but the obligation to ensure hard-working Americans continue to have access to retirement advice from their independent financial advisor of choice.”
But in a series of tweets on Friday, investor advocate Barbara Roper took aim at the planned legislation, saying that while lawmakers claim the bill would protect investor choice, it “really protects industry’s bottom line.”
Updated 9:30 a.m. Nov. 6, 2015 to include additional comments.