HELP Subcommittee Addresses the DOL’s Proposed Conflicts of Interest Rule

WASHINGTON – Today, the Subcommittee on Health, Employment, Labor and Pensions (HELP) held a hearing on the “Restricting Access to Financial Advice: Evaluating the Costs and Consequences for Working Families and Retirees.” The hearing addressed the U.S. Department of Labor’s proposed standards to ensure retirement advisors act in the best interest of their clients when giving investment advice.

 

“Families look to financial advisors and institutions for trusted advice, and should not need a finance degree in order to make sound decisions regarding their retirement savings,” said full committee Ranking Member Bobby Scott. “DOL has taken a much needed step to protect the hard-earned retirement savings of families by proposing a rule to curb conflicted investment advice. While we need to do more to help workers save for retirement, the very least we can do is safeguard the retirement investments they have already made by strengthening protections against unscrupulous and conflicted investment guidance.”

 

The Honorable Thomas Perez, Secretary of the U.S. Department of Labor, testified before the committee. The Secretary emphasized the importance of ensuring hardworking Americans get a fair share of the returns on their retirement savings. 

 

“Retirement security is a fundamental pillar of the middle class,” stated Secretary Perez in his written testimony. “We must ensure that Americans who work hard and save responsibly for retirement are getting a fair share of the returns on those savings. This Subcommittee knows too well that there is a retirement crisis in America and that not enough Americans are saving for retirement. I’m deeply concerned that even if you’ve done the right thing, worked hard, and saved what you could, you could end up in a situation where you do not have what you need for retirement simply because your adviser isn’t required to put your interests first.”

 

According to the President’s Council of Economic Advisers, conflicted advice could result in a loss of almost a quarter of savings over a 35-year period. The Department of Labor estimates in its Regulatory Impact Analysis that the rule will save retirement investors $40 billion over 10 years. 

 

While many advisers intend to serve the best interest of their clients, lack of reforms to the current system can leave families vulnerable, costing thousands of dollars in valued life savings. The Department of Labor’s proposed rule would align the system with the needs of middle-class Americans to mitigate conflicts. Democrats believe that as our economy changes, it is the responsibility of legislators to ensure that institutions serving middle-class families are held to consistent and higher standards to better protect families’ hard-earned investments. 

 

Dennis Kelleher, President and Chief Executive Officer of Better Markets, Inc.—a nonprofit, nonpartisan organization that promotes the public interest in the domestic and global capital and commodity markets—also testified at the hearing. 

 

 

“It is simply inappropriate that any financial adviser in this country is allowed to provide retirement investment advice to a worker or retiree that does not put the best interest of the client first,” said Kelleher. “Yet that is what the current DOL rules have allowed for 40 years. As a result, advice is too often driven by conflicts of interest. The DOL’s proposed rule closes loopholes that are archaic and unjustifiable, especially in light of the massive changes that have occurred in the retirement landscape over the past 40 years. After years of meeting with and listening to the industry, the DOL’s proposed rule makes many accommodations to the industry’s core concerns, but the rule still faces significant industry opposition. Every day that passes without a final, updated rule is costing hard-working Americans literally tens of millions of dollars in retirement savings. They should not have to wait any longer for the protections they sorely need to plan for a more secure and dignified retirement.” 

 

Testimony of the Honorable Thomas Perez, Secretary of the U.S. Department of Labor, can be found here. 

 

Testimony of Dennis Kelleher, President and Chief Executive Officer, Better Markets, Inc., can be found here.

 

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