The caucus expresses a strong interest in the upcoming fiduciary redefinition in an open letter sent to U.S. Secretary of Labor Thomas Perez, which reminds the DOL that many of the retirement-readiness challenges impacting workers in the U.S. are especially hard on the Hispanic community.
“We have an interest in the re-proposed definition of a fiduciary because of the unique circumstances of Hispanics in saving for retirement,” reads the letter, penned and signed by Ruben Hinojosa (D-Texas), caucus chair. “Recent studies have shown that low and middle-income Hispanics and other minorities have retirement plan savings that are almost 40% lower than other low and middle-income individuals. In fact, only 38% of Latino employees age 25 to 64 have access to an employer-sponsored retirement plan.”
Antonio “Tony” Cardenas (D-California), also appears on the letter as a signatory.
The fiduciary redefinition addressed in the caucus’ letter has been delayed multiple times since first being proposed in 2010. In a recent conference call with reporters, top DOL officials said they hope to have the final redefinition proposal ready by August of this year.
The caucus’ position in its letter is a nuanced one, considering the debate which has surrounded the pending fiduciary redefinition. While it’s still unclear what exactly the expanded fiduciary rules will look like, many in the industry have expressed concern that making fiduciary rules stricter will force some service providers to eliminate the less expensive forms of advice sometimes offered to low and middle-income workers. The idea is that such firms will not want to take on fiduciary responsibility for the workers to which they currently provide low-cost advice (see “Fiduciary Status Could Be a Big Rollover Plus”).
The letter doesn’t specifically mention this issue, but it does remind the DOL that, whatever service providers the final definition of fiduciary turns out to cover, Hispanic workers need better access to financial advice and education.
On the other hand, and more in line with points raised by the DOL regarding an expanded fiduciary definition, the caucus also writes that it is “critically important” that the new rule protects individuals from misleading or harmful advice. That argument lines up more with those who support a wider definition of fiduciary, who often argue that certain service providers, such as broker/dealers, should be held to a higher standard in terms of the products they promote to their clients to cut down on potential conflicts of interest. Current rules apply only a “suitability” standard to these providers, which is less strict than the fiduciary standard dictating all decisions must be made in a client’s best interest.
A full copy of the Congressional Hispanic Caucus letter is available here.