WASHINGTON, D.C. | June 17, 2015
I wish we were here to discuss a proposal that enjoyed broad bipartisan support, one that would help strengthen our economy and improve the lives of hardworking men and women. Unfortunately, that’s not the case. Instead, we are here to address a regulatory scheme that will hurt a lot of families, retirees, and small business owners, and it could not come at a worse possible time.
One of the most difficult challenges we face as a country is a lack of real retirement security for America’s families. The defined benefit pension system continues to experience a decades-long decline, while many workers are still rebuilding the savings they lost in the recent recession. Due to these and other challenges – including a persistently weak economy – too many workers are retiring without the means necessary to ensure their financial security.
Our goal as policymakers should be to advance bold, bipartisan solutions that will help more Americans plan, invest, and save for retirement. Regrettably, the department’s fiduciary regulation would move our country in the opposite direction. It would cut off a vital source of support many low- and middle-income families and small business owners rely on, and that is the help of a trusted financial advisor.
Four years ago, the subcommittee examined a similar proposal that was later withdrawn under intense bipartisan opposition. I said at the time that anyone who provides investment assistance should be well trained, committed to high ethical and professional standards, and devoted to the best interests of those they are serving.
That is why financial advisors have long been subject to a host of securities, tax, and disclosure requirements. It is a complex system of rules and regulations, but it is an important one that has worked well for decades. That does not mean we shouldn’t look for opportunities to improve current standards. But we cannot – in any way – make it harder for workers, retirees, and small business owners to receive the financial advice they may need.
Yet that is precisely what this regulatory proposal would do. Offering some of the most basic assistance would be prohibited, such as advice on rolling over funds from a 401(k) to an IRA. Financial advisors would no longer be able to assist individuals in how to manage their funds upon retirement. And small business owners would be denied help in selecting the right investment options for their workforce, which will lead to fewer employees enrolled in a retirement plan.
It has been suggested on numerous occasions that this proposal will simply apply to financial advisors the same standard recognized in the medical profession. Mr. Secretary, I believe you have drawn that comparison from time to time. It is a clever talking point, but one that couldn’t be more flawed.
As a physician with more than 30 years of experience treating patients, let me just say that the approach reflected in this proposal would destroy what’s left of our health care system. Imagine what would happen if doctors were prohibited from receiving compensation, or were required to sign a contract with each patient before delivering services, or were forced to publish online each and every treatment that had been prescribed the following year. No doctor could run a successful practice under this type of regulatory regime, and no responsible financial advisor will be able to either.
Make no mistake, if this rule goes into effect, a lot of people will quickly learn that their financial adviser – someone they may have known and trusted for years – will no longer be able to take their call. And it is important to note that low- and middle-income families are the ones who will bear the brunt of this misguided proposal. They will lose access to the personal service they rely on and be forced to find suitable advice online or simply fend for themselves.
As is often the case with big government schemes, the wealthiest Americans will do just fine and those we want to help will be hurt the most. Mr. Secretary, this latest fiduciary proposal will lead to the same harmful consequences as the first and should suffer the same fate: Please withdraw this proposal and work with this committee on a responsible, bipartisan approach that will strengthen protections for investors and preserve robust access to financial advice. Our nation’s workers and retirees deserve nothing less.
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