As the Department of Labor (DOL) continues pushing forward determined to redefine the term 'fiduciary,' members of Congress on both sides of the aisle have become keenly aware of the potential risks of the new rule. As I have mentioned here previously, this new rule would price millions of Main Street American investors out of access to professional advice on their IRAs, and significantly increase investor confusion at a time no one can afford to be confused.
The Financial Services Institute (FSI) and members of Congress from both sides of the aisle have been outspoken in demanding transparency from the DOL during the rule-making process. In response, unfortunately, the Department has told us all that we will simply have to wait until its revised proposal is finished to know where they are headed with the rule.
At a hearing of the House Committee on Education and the Workforce on March 21, however, Republican and Democratic members of Congress alike made it clear to Labor Secretary Hilda Solis that the Department’s approach on this crucial issue is wearing thin.
Addressing Secretary Solis, Rep. Carolyn McCarthy (D-N.Y.) said, “I think it’s time, to be very honest with you, for many of us, the members of Congress, to sit down with the heads [of the Department] and try to figure out how we’re going to go on this. I think it’s really very important because this has been dragging on now for quite a long time. It’s not good. Businesses need to know what they’re going to be doing. Certainly we, many of us here on this particular committee, many on the Financial Services Committee, would like to work together and see if we can come to some sort of resolution in the near future.”
Rep. Rush Holt (D-N.J.) said, “I’m concerned the Department is asking the wrong questions. This won’t get to the issue of how employees make the right decisions. How we can increase access to investment advice. Are you finished asking for additional data? I hope not.”
Rep. Phil Roe (R-Tenn.) expressed concern that the DOL is offering a solution in search of a problem: “What problem with the small investors are you trying to fix, because it’s not clear to me. For the small investors like my daughter, what are you trying to fix?”
Rep. Judy Biggert (R-Il.) asked whether the Department is doing enough to coordinate with the Securities and Exchange Commission (SEC) on that agency’s efforts to craft a new fiduciary standard as mandated by Dodd-Frank. When Rep. Biggert asked if the DOL would issue a joint Request for Information with the SEC, Secretary Solis responded that she could not say. She also declined to say how the new rule would differ from the old rule that DOL withdrew last Fall.
As the comments from the House committee hearing above make clear, opposition to the DOL’s redefinition of 'fiduciary' is bipartisan and fierce. While the SEC works to develop a new fiduciary standard as allowed by Dodd-Frank, the DOL has inserted itself into the process without any invitation from Congress, putting at risk the professional, affordable financial advice that Main Street Americans have come to depend on.
Secretary Solis and the Department have repeatedly declined to identify the problem they are trying to fix. American investors deserve to have a government that works with them, not against them.
While we still do not have a clear sense of the Department’s objective in redefining “fiduciary,” we do know what the outcome could be without greater transparency in the rule-making process: a new proposal that threatens millions of IRA investors’ access to advice from financial advisors and puts their futures at risk.