Republican and Democratic lawmakers introduced a pair of legislative proposals that, supporters suggest, would “ensure retirement advisers serve their clients’ best interests and preserve access to quality financial planning,” in part by delaying the Department of Labor’s (DOL) fiduciary reform effort.
Sound familiar? The proposals come in the immediate aftermath of a failed Congressional effort to stymie the DOL’s fiduciary rulemaking effort through the budgetary process. They are being championed by Representatives Peter Roskam (R-Illinois), Richard Neal (D-Massachusetts), Phil Roe (R-Tennessee), and John Larson (D-Connecticut).
The representatives say their new proposals would take steps to codify a set of bipartisan principles members introduced in November. “The bills represent a legislative compromise that will protect consumers and keep high-quality financial advice affordable for all Americans,” they argue.
In short, the Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act, led by Rep. Roskam, and the Affordable Retirement Advice Protection (The ARAP) Act, led by Rep. Roe, would require an affirmative vote by Congress before any final rule by the Department of Labor goes into effect. If Congress fails to approve the department’s regulatory proposal, a new fiduciary standard would take effect that, according to reps:
- Raises the bar for the entire financial services industry by requiring advisers to serve in their clients’ best interests;
- Roots out bad actors by penalizing financial professionals who violate the trust of their clients;
- Requires advisers to clearly communicate key information to ensure investors are well-informed to make investment choices; and
- Ensures that individuals and families saving for retirement have access to advice and investment options to meet their individual needs and circumstances.
The new fiduciary rule thus formulated would take effect by amending the Internal Revenue Code of 1986 (The SAVERS Act) and the Employee Retirement Income Security Act of 1974 (ARAP Act). The representatives suggest the proposals “together will raise investment advice standards for the retirement industry to ensure financial advisers act in the best interests of their clients, while also ensuring low- and middle-income Americans have access to quality, affordable financial advice to help plan for retirement.”
NEXT: Industry reaction is swift, generally positive
Supportive industry groups were clearly expecting this action given the swift flurry of commentary broadcasted to reporters and industry analysts Friday afternoon.
For example, American Council of Life Insurers (ACLI) President and CEO Governor Dirk Kempthorne, suggested “an issue as significant to the retirement security of millions of Americans as the Labor Department’s proposed fiduciary rule demands Congressional involvement, which is why ACLI supports bipartisan bills introduced today.…Many of the 10,000 Baby Boomers reaching age 65 every day need help now, or will need help in the near future, financially planning for retirement. These bills are pro-consumer because they enhance consumer protections by ensuring savers and retirees maintain access to financial professionals who will be required to act in their clients’ best interest.…We urge more members of Congress to co-sponsor these bills and encourage swift action in the House and Senate.”
The Insured Retirement Institute (IRI) also weighed in, releasing a statement from IRI President and CEO Cathy Weatherford. Like Kempthorne, she suggests matters involving the retirement security of millions of Americans “are far too important for Congress to remain on the sidelines.”
“We applaud Congressmen Peter Roskam, Richard Neal, Phil Roe and John Larson, as well as the other co-sponsors including Buddy Carter, Michelle Lujan Grisham and Tom Reed, for demonstrating tremendous leadership by ensuring Congress has its say on this issue and delivers important protections for retirement savers,” she says. “We support a best interest standard of care for financial professionals when recommending investment products, but remain concerned that the DOL’s proposal will restrict and limit access to retirement planning advice and result in fewer choices for retirement savers.…We fully support the underlying principles behind this legislation and encourage all policymakers to back this approach.”
Investment Company Institute (ICI) President and CEO Paul Schott Stevens agrees the proposals “would set a best-interest standard covering those providing retirement advice and include other provisions that serve as an alternative to the current fiduciary-standard rule proposal under consideration by the Department of Labor.”
“These bipartisan bills present a commonsense approach to implementing the broad consensus in support of a new, consumer-focused best-interest standard—in stark contrast with the flawed approach that the DOL has pursued throughout this process,” Stevens argues. “Provisions in these bills would protect the individual savers who would be harmed by the fiduciary rule currently proposed by the DOL.”