WASHINGTON – Rep. Ann Wagner (R-Mo.) predicted that the U.S. Labor Department’s Obama-era fiduciary duty rule would “exacerbate the current savings crisis” if it is fully implemented in its current form.
The Conflict of Interest rule would amend existing law and define financial professionals who offer investment advice for retirement plans as a “fiduciary.” Last month, the Trump administration’s Labor Department announced that it was going to delay the implementation of the rule.
Despite the delay, portions of the fiduciary duty rule went into effect in June as Labor Secretary Alexander Acosta said he could not prevent every part of the rule form taking effect.
“I don’t see how the Department of Labor’s decision is commensurate with the president’s memorandum, so I am disappointed. It regrettably appears Obama-era bureaucrats in the Department of Labor may have been allowed to overrule President Trump’s wishes,” House Financial Services Chairman Jeb Hensarling (R-Texas) said in May.
“I am especially disappointed for those low- and moderate-income Americans who rely upon investment advice to plan their retirements. This flawed fiduciary rule means their costs will likely go up and their choices will likely go down – just like with Obamacare,” he added.
Wagner, a member of the House Financial Services Committee, said eliminating the federal fiduciary duty rule should not be viewed as a partisan issue.
“I hate to see this become what it has become, which is a political football, because it really affects those low- and middle-income investors across the board. And if we get this wrong, it will only serve to exacerbate the current savings crisis that I think you all know we are in currently,” Wagner said during a recent U.S. Chamber of Commerce event, “Fiduciary Duty: Assessing the Real World Impact.”
“You know the statistics; they are dismal. I mean, half of all households age 55 and over have no retirement savings, none, and 62 percent of Americans have no emergency savings. If they had to cover a $400 unexpected expense for a car repair or a medical expense, they couldn’t. They couldn’t do it with their savings – that’s 62 percent of American households,” she added.
Wagner, chairwoman of the House Financial Services Oversight and Investigations Subcommittee, pushed back against supporters of the Obama-era fiduciary duty rule who argue that the proposal is “about Wall Street” rather than “Main Street.”
“It is about that low- and middle-income investor,” she said. “This misguided rule will restrict access and choice and it will raise costs.”
The rule is set to be fully implemented in July 2019. Wagner introduced legislation this week that would repeal the rule and remove the Labor Department from the “broker dealer space” altogether.
“We must create a best-interest standard for all broker dealers and their entire portfolio investment vehicles, both investment and retirement – a best-interest standard for all broker dealers that Congress sets,” she said.
In the meantime, some states are reportedly looking to create their own fiduciary duty rule. In June, Nevada became the first state to pass its own “fiduciary protections” while the fate of the federal fiduciary rule is decided. Other states might soon follow suit.
“As a financial planner, I would not be excited about the complexity of a patchwork of state regulations,” said Scott Beaudin, a CPA and chairman of the National Association of Personal Financial Advisors, according to a recent report. “Ideally, you would have a federal solution.”