If there was any lingering doubt about which side—investors or Wall Street—congressional Democrats were on, it was erased in Monday’s letter to Secretary of Labor Tom Perez, signed by 30 Democrats who bill themselves as “The New Democrat Coalition.”
While Democrats including the Coalition have made much political hay in recent years from their support of “working Americans” by passing the Dodd-Frank Wall Street Reform and Consumer Protection Act (my italics), it seems that “support” does not extend to actual implementation of those “consumer protections.” Apparently, the old business adage “Agree to anything, but have your lawyer draft the contract” has been redrafted in Washington to read: “Sign anything into law, but have your bureaucrats write the regulations.”
Toward that end, the Coalition’s letter proudly recounts its role in nixing the first attempt by the Department of Labor, then under Secretary Hilda Solis, to extend fiduciary protections to investors in pension plans: “In this regard, Members of the New Democrat Coalition had written Secretary Solis in 2011 with concerns about the Department’s proposal to redefine the term ‘fiduciary’ [under ERISA]…We were very pleased that Secretary Solis agreed with our recommendation that the rule as initially proposed needed to be withdrawn…”
Now it seems that the Coalition is reading right out of SIFMA’s playbook by claiming to protect small investors, while citing the dire—but unsubstantiated and illogical—consequences of requiring advisors to put the interests of those investors first. “We certainly want to protect plan participants, IRA owners and plan sponsors from unfair and deceptive practices,” they wrote. “But this should be done in a way that does not restrict access to critical investment assistance.”
Let’s be clear here, so as not to miss the point: subjecting investors and plan sponsors to “unfair and deceptive practices” would be a bad thing, but stopping those abuses is not nearly as important as “access to critical investment assistance.” Maybe I’m missing something, but doesn’t this raise questions like: How “critical” could investment assistance be if it includes unfair and deceptive practices? Do investors really benefit from unfair and deceptive investment advice?