Recent developments in Washington that should grab advisors’ attention include the Treasury department’s first report on regulatory reform, the CFP Board’s request for public comment on its revised Standards of Professional Conduct that include “strengthened” fiduciary standards, as well as the House of Representative’s passage of the Financial Choice Act to derail Dodd-Frank and the Department of Labor’s fiduciary rule.
Industry trade groups such as the Investment Adviser Association, the Financial Services Institute and the Financial Planning Association also recently descended on Washington to hold their annual lobbying days.
Top of mind for the FPA was educating elected officials on the financial planning profession and “the role FPA plays in giving the financial planning community, including CFP practitioners, a professional home,” Shannon Pike, 2017 FPA president, told IA. FPA members also advocated for a fiduciary standard, including Labor’s fiduciary rule, and urged lawmakers to oppose any bills to thwart the rule, he said.
House Republicans introduced legislation on June 8 to overturn Labor’s fiduciary rule, a day before its effective date. Rep. Phil Roe, R-Tenn., a member of the House Committee on Education and the Workforce, and Rep. Peter Roskam, R-Ill., chairman of the Ways and Means Subcommittee on Tax Policy, introduced the Affordable Retirement Advice for Savers Act, H.R. 2823.
In introducing this bill, the lawmakers said it would “protect access to affordable retirement advice by overturning the Obama administration’s flawed fiduciary rule while ensuring retirement advisors serve the best interests of their clients.”
The same day, Sen. Johnny Isakson, R-Ga., reintroduced companion legislation, the Affordable Retirement Advice Protection Act, S. 1321, which he argued would “preserve access to quality financial planning and ensure that retirement advisors serve the best interests of low- and middle-income Americans.”
In addition, the bill would amend the Employee Retirement Income Security Act “to raise investment advice standards for the retirement industry and strengthen protections for those saving for retirement.”
Also in early June, Labor released a request for information seeking public input on potential further changes to its fiduciary rule. The RFI, posted on the Office of Management and Budget’s website, was still being reviewed by OMB as of press time.
Jeff Brown, senior vice president and head of Charles Schwab’s Office of Legislative and Regulatory Affairs, told IA during IAA’s annual lobbying day in Washington that Schwab has “weighed in on the [fiduciary] rule for seven years; we’ll dive back in” and provide comments on the current RFI, “and we will be an advocate of our clients’ position.”
Change could be made “to improve” the rule around the Best Interest Contract Exemption, where “the disclosures are over-burdensome” and require “massive amounts of information to be put on [advisors’] websites,” Brown explained. The rule’s “creation of the private right of action and the trial bar” as an enforcement mechanism “will really be a problem. … That is not an appropriate enforcement mechanism.”
Financial Choice Act
After nearly four hours of debate on June 8, the House passed the Financial Choice Act, legislation sponsored by House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, designed to replace the Dodd-Frank Act, derail Labor’s fiduciary rule and gut the Consumer Financial Protection Bureau.
Democrats offered no amendments to the bill, which passed by a 233-186 vote, and noted during floor debate that the Choice Act is likely dead on arrival in the Senate.
Treasury Report on Reg Reform
Treasury’s first report on regulatory reform, released in early June, recommends that Congress reduce fragmentation, overlap and duplication in federal regulation by consolidating regulators with “similar missions” and more clearly defining their regulatory mandates.
The report also argues that Dodd-Frank has “increased the burden of regulatory compliance without adequate cost-benefit analysis,” and that Dodd-Frank has “prolonged the moral hazard arising from regulations that could lead to taxpayer-funded bailouts.”