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The Subcommittee on Health, Employment, Labor, and Pensions, chaired by Rep. Phil Roe (R-TN), today held a hearing on a Department of Labor proposal that would restrict access to financial advice and expand the definition of “fiduciary” under the Employee Retirement Income Security Act. Members questioned Secretary of Labor Thomas Perez, raising concerns that the proposal is unworkable and would make it harder for working families to save and plan for retirement.

“Our goal as policymakers should be to advance bold, bipartisan solutions that will help more Americans plan, invest, and save for retirement,” Chairman Roe said. “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.”

Despite current policies that have worked well, the department’s proposal would impose a host of costly new mandates and a burdensome regulatory structure severely restricting the advice or information investment professionals may provide. Witnesses outlined the far reaching consequences of the regulatory proposal for low- and middle-income families and small businesses, including higher costs and a loss of access to trusted financial advisors.

Drawing from decades of experience advising companies that provide retirement services and benefits to families, attorney Kent Mason explained, “The problem with the [department’s] proposal is not the best interest standard; the problem is the ‘prohibited transaction rules’ that cut off low- and middle-income individuals and small businesses from access to personal investment assistance.” Mason described how the dramatic expansion of the term “fiduciary,” combined with extensive and onerous exemption conditions, would lead to small businesses losing help in setting up retirement plans and investors with fewer resources losing access to professional investment assistance.

Jack Haley, executive vice president for Fidelity Investments, supported Mason’s claims, describing how the department’s proposal would affect his ability to provide assistance to clients. “Under the DOL proposal, access to affordable financial help will effectively be prohibited – even when it is in the investor’s best interest,” he said. Haley emphasized the proposal “specifically prohibits service providers from assisting small businesses,” which would have a “devastating impact on retirement coverage and savings for millions of workers employed by small businesses across the country.”

“The current [department] proposal … is based on flawed assumptions that lead it to be too complex, too cumbersome, and too costly,” added Dean Harman, a certified financial planner with more than 20 years of experience. Describing his personal experience as an advisor, Harman said his concern lies with requirements that will drive up costs and make providing retirement advice to those with modest retirement savings accounts more difficult. He continued that with implementation of the current proposal, he fears he will be unable to provide retirement advice to all of his clients, “especially those with lower balances in their retirement accounts.”

Echoing concerns that the department’s proposal is “hopelessly complex, confused, and, in its current form, unworkable,” Investment Company Institute Chief Economist Brian Reid also highlighted the “fundamentally flawed” nature of the analysis the department is relying on to justify the rule. Reid noted the analysis does not properly consider many of the proposal’s negative impacts, ignores market realities, and “does not establish that the benefits of its rule justify its significant costs.”

With so many concerns surrounding the department’s rule, Chairman Roe urged Secretary Perez to withdraw the proposal and “work with this committee on a responsible, bipartisan approach that will strengthen protections for investors and preserve robust access to financial advice.” He concluded, “Our nation’s workers and retirees deserve nothing less.”

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