Lawmakers in the House are poised to roll out an alternative to the pending Department of Labor rule that redefines the definition of a fiduciary, in fear the new regulations will limit low- and middle-income individuals from seeking retirement advice.
In an outline released Thursday, Illinois Republican Peter Roskam, Massachusetts Democrat Richard Neal, Tennessee Republican Phil Roe and New Mexico Democrat Michelle Lujan Grisham called for disclosure of any possible material conflicts while providing access to financial advice.
The DOL rule is an attempt by the agency to prevent conflicts of interest by eliminating the incentive for advisers to suggest options with higher commission percentages for personal gain, but the group of lawmakers said it could have “unintended negative consequences that could harm individuals and families saving for retirement.”
The prosed regulation opposes in-person retirement advice provided by commission-based financial brokers, instead offering the options of using either an automated robo-adviser for investments, the option favored by the Obama administration, or using fee-based services.
“The Department of Labor has said it will change certain aspects of the regulation before final issuance,” the lawmakers said in a joint statement. “However, if the final rule has flaws, damage can be done upon the rule’s release due to the immediate changes the retirement savings industry would have to make and the likelihood that those changes could limit access to services and education for those saving for retirement.”
The House passed a bill last week that would halt the regulation from being implemented by turning it over to the Securities and Exchange Commission, but the administration issued a veto threat against the measure, saying it’s necessary to protect investors retirement savings.
While insurance salesman, broker dealers and dually registered financial advisers are held the to fiduciary standard, the rule would expand the scope of who falls under the umbrella of regulations by expanding the definition of what is considered investment advice under the Employee Retirement Income Security Act.
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