WASHINGTON, D.C. | December 2, 2015
Retirement security is something many Americans work hard to achieve, but doing so can be very challenging. While many individuals understand the need to plan for retirement, they don’t necessarily know the best way to do so. That’s why many workers rely on financial advisors to help them build a foundation for a secure retirement. And why too many others simply retire without the resources they need to remain financially stable.
Men and women who have worked hard all their lives want to enjoy their retirement – spending time with their grandchildren, taking up a new hobby, or finally getting through the to-do list they didn’t have the time to tackle before. They don’t want to worry about making ends meet or leaving their loved ones with a significant financial burden.
As policymakers, we should be doing everything we can to ensure workers are able to effectively plan for life after leaving the workforce. Unfortunately, we’re here today because a proposal from the Department of Labor is threatening to make it harder for workers to do that.
The administration has said this proposed rule – known as the “fiduciary rule” – will require retirement advisors to put the best interests of their clients above their own financial interests. That, of course, is an admirable goal and one we agree is worth pursuing. Financial advisors should act in their clients’ best interests, and Republicans have long said we are open to modernizing current rules in a way that provides more protections to those seeking retirement advice.
However, as witnesses explained at a committee hearing this summer, the department’s rule – as proposed – will impose on financial advisors a host of costly new mandates and burdensome regulations that will have far reaching consequences for those most in need of assistance. And as with most well-intended Big Government schemes, it’s the people who need help who are hurt the most.
Many low- and middle-income families will lose access to some of the most basic retirement advice. These individuals – who already have fewer resources to invest – will no longer be able to seek guidance from trusted financial advisors and could be forced to pay exorbitant fees or fend for themselves online. Additionally, small business owners will be denied assistance in choosing the best investment options for their employees, leaving many small businesses unable to offer any retirement plan at all.
The proposal is so extreme and unworkable that it is drawing serious concerns from both sides of the aisle. A significant number of Democratic policymakers in both the House and the Senate have written to the department about the proposed rule, calling its anticipated effects “troubling” and urging the department to “seek a balanced approach.” This committee sent a letter with a similar request, asking for the withdrawal of the proposal and encouraging the department to work with Congress on a more responsible approach.
Now, if this all sounds familiar, there’s a good reason: We’ve been through it before. Nearly five years ago, the department pursued a similar regulatory proposal, and similar bipartisan concerns were raised. The difference is that last time around, the department listened to those concerns, withdrew its proposal, and went back to the drawing board to develop a new – albeit similarly flawed – rule. This time, the department seems determined to ignore legitimate bipartisan concerns and force its misguided rule on the American people.
That’s why I am working – along with a number of my Republican and Democrat colleagues on this committee and the Ways and Means Committee – to develop a legislative solution that will accomplish what the Department of Labor has failed to do. Our proposal will strengthen retirement security, but, unlike the department’s approach – it will do so without hurting working families and small businesses.
To guide this effort, we developed a set of important principles that our bipartisan solution will reflect, such as protecting access to the retirement advice workers, retirees, and small business owners need and ensuring retirement advisors serve their clients’ best interests. Let me repeat that: their clients’ best interests. We believe that financial advisors should look out for their clients’ best interest, but we also believe the rules governing financial advice should do no harm to those saving for retirement.
Today’s hearing is an opportunity to further explore these principles, to hear what our witnesses believe a workable best interest standard looks like, and to continue our work to introduce a responsible legislative proposal that will help individuals save for their retirement. I look forward to our discussion and to the work ahead.