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To Protect Workers, Employers, & Retirees, Committee Republicans Urge Administration to Withdraw Flawed Fiduciary Regulation

To ensure workers, employers, and retirees can continue to access trusted financial advisors, Republican members on the House Education and the Workforce Committee have called on the Department of Labor to withdraw its flawed fiduciary rule. Concerned with the impact the proposal will have on low- and middle-income families and small businesses, the members stated in a letter to Secretary Thomas Perez:

[T]his proposal would cut off vital financial advice for many low- and middle-income families and small business owners. For example, some of the most basic advice, such as assistance in rolling over funds from a 401(k) to an IRA or determining how funds are to be distributed upon retirement, would be prohibited. Additionally, small business owners will be denied assistance in selecting the right investment options for their employees, which means fewer small businesses will offer employees a retirement plan. Furthermore, low- and middle-income families with fewer resources to invest will lose access to advice or have to pay substantially higher fees in order to continue seeing their trusted advisors.

For nearly five years, the Department of Labor has pursued a regulatory proposal that would vastly expand the long-held definition of fiduciary governing the conduct of financial professionals. An initial proposed rule was subsequently withdrawn after strong, bipartisan concerns were raised regarding the negative impact on Americans saving for retirement. Unfortunately, as was confirmed at a recent oversight hearing, the current regulatory proposal has failed to address these earlier concerns. As the members asserted in their letter:

The Committee has long believed that financial advisors “should be well trained, committed to high ethical and professional standards, and devoted to the best interests” of those they are serving. These shared values should have formed the basis of a consensus update to … fiduciary regulations. Sadly, we now fear DOL’s approach is motivated by an insatiable desire to reengineer the retirement services industry and control the mode and manner that Americans save for retirement.

Additional concerns have been raised about whether the department is sufficiently coordinating its efforts with the Securities and Exchange Commission (SEC), which is legally authorized under the Dodd-Frank financial services reform law to examine the standard of care for investment advisers and broker-dealers. Despite repeated attempts by the committee to determine the substance of the department’s alleged coordination with SEC, the department has refused to provide a complete response.

Concluding their letter, the members urged the department to withdraw its misguided proposal and work with Congress on a more responsible approach:

Our nation’s workers, small business owners, and retirees deserve better than this proposal, which will result in less financial advice and higher costs for those saving for retirement. Like its flawed predecessor, this regulatory proposal should similarly be discarded. We urge you to withdraw this proposal and work with Congress to strengthen protections for investors and preserve robust access to financial advice.

The full letter, signed by Republican members on the Education and the Workforce Committee, is available here.