A well-mannered, at times jocular subcommittee hearing on the Department of Labor’s conflict of interest proposal in the Senate turned in tone when Sen. Elizabeth Warren, D-Massachusetts, took to questioning panel witnesses.
One in particular, Peter Schneider, president of Primerica Inc., a Georgia-based provider of investment services distributed through a channel of 90,000 advisors, was specifically signaled out by Sen. Warren, a staunch supporter of the DOL’s rule.
In the testimony he gave to the Health, Education, Labor and Pensions subcommittee, Schneider testified that the DOL’s current proposal is more “punishing” than the first one withdrawn in 2011.
Schneider’s testimony was representative of the opposition to the DOL’s rule that believes the Best Interest Contract Exemption will ultimately force the advisory industry to a fee-only model of compensation. That in turn will disincentivize providers from serving the low and middle-account market, say opponents to the rule.
Primerica will pay $1.2 billion in death benefits to beneficiaries this year alone, said Schneider, and the firm has helped savers put away $50 billion for retirement. Most of which is in small accounts, he said.
The average household income of a Primerica account holder is between $30,000 and $100,000 a year, precisely the type of retirement investors that will be denied access to advice if the proposed rule is enacted, according to the DOL’s opponents.
“Inadequate retirement savings is the overriding issue facing the middle class,” said Schneider. “This rule is another obstacle.”
In her time, Warren made an opening salvo–“it is now perfectly legal for retirement advisors to give advice that boosts their own incomes by selling lousy products to clients”—before turning to Schneider.
Warren brought attention to a string of lawsuits brought by civil servants in Florida that accused Primerica advisors of recommending they cash out their state pensions in order to open accounts with Primerica.
“At least 238 firefighters and teachers and other career public workers near retirement age accused your company of providing bad advice that drained their retirement savings,” said Warren, citing an unnamed news source.
“Primerica was poised to make a lot of money,” continued Warren, “but only if you could convince Florida firefighters who were near retirement to cash out their guaranteed pensions.”