The White House memo supporting the Department of Labor’s revised rule to redefine fiduciary in retirement plans is “overly broad in condemning the industry and fairly conclusory without citing a lot of specifics,” former Minnesota Gov. Tim Pawlenty said Wednesday.
The former Republican presidential candidate, now CEO of the Financial Services Roundtable, told reporters after an FSR event in Washington that while there may be “concerns about the way that brokers are behaving” when giving retirement plan advice to retail investors, the leaked White House memo drafted by President Barack Obama’s chief economic advisor, Jason Furman, “was sweeping” in addressing such concerns “without citing specific data.”
Concerns about brokers’ behavior in retirement plans “should be addressed in a way that isn’t overly broad and not so burdensome that they shut off the availability of advice to low- and moderate-income investors,” Pawlenty said.
In a Jan. 13 internal memo to senior White House advisors that was obtained by ThinkAdvisor, Furman, chairman of Obama’s Council of Economic Advisers, states that the DOL redraft “represents a middle ground,” and that he agrees with DOL that the current regulatory environment allows brokers to give “conflicted” advice, costing retirement savers more than $6 billion a year.
DOL’s redraft of its rule to amend the definition of fiduciary under the Employee Retirement Income Security Act, which is expected to reach the Office of Management and Budget any day now, must go through a 90-day review by OMB.
ThinkAdvisor reported last July that the White House’s National Economic Council would be performing “industry outreach” regarding the DOL’s fiduciary redraft. The NEC was part of a White House working group charged with overseeing the DOL fiduciary redraft.
Pawlenty was speaking at an event to announce a public-private initiative by FSR and the Consumer Financial Protection Bureau to promote effective financial education and collaborate on financial literacy.
Richard Cordray, CFPB’s director, said at the FSR event that FSR and CFPB will “explore ways we can work together to advance a vision for stronger and more capable consumers,” and the groups will focus their efforts on three areas: working with the nation’s schools and teachers to help young people increase their financial capability; providing workplace financial education; and helping to educate older Americans and those who care for them to avoid financial scams and abuse. “I have no doubt that we can forge a powerful alliance to advance these three important causes,” Cordray said.
Cordray cited a recent survey by Aon Hewitt that found 93% of employers surveyed are likely to expand their focus on “financial wellness in the workplace” in the next year.
“The financial services industry can and should lead by example here,” Cordray said. “They have the expertise and credibility to promote best practices around budgeting, savings, and retirement options.”
FSR member company executives and CFPB “subject matter” experts will hold a roundtable on Jan. 28 to discuss the groups’ joint initiatives and early in 2015, FSR members and CFPB staff will hold “working group sessions” to identify, select and discuss “educational practices that can be scaled and promoted to help consumers make informed financial decisions on specific topics.”
— Check out FSI Chair Blasts White House Fiduciary Memo as ‘Offensive’ on ThinkAdvisor.