DOL Fiduciary Debate Heats Up

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DOL Fiduciary Debate Heats Up

The fight over a Department of Labor proposal to increase investment advice standards for retirement accounts have begun to intensify. Over the last week, the writer of a bill that would prohibit the rule lashed out at Democrats for backing away from her measure, a well-known senator forced a critic of the bill out of a Washington think tank, and a DOL official promised to charge ahead while acknowledging there will be changes in the proposal. Simultaneously, a pro-investor organization released best practices for financial advisers to place clients’ interests ahead of their own.

In a House Financial Services Committee vote last week on a bill by Representative Ann Wagner, R-MO., that would make the Labor Department stop its fiduciary rule until the SEC acted, practically preventing the measure, Republicans and Democrats took different sides and started a war of words.

“To the pen pals and the panderers who supported this legislation in the past but are now siding with President Obama and [Sen.] Elizabeth Warren, shame on you!” Ms. Wagner said in a statement after the vote. “Putting politics ahead of the best interests of millions of Americans is wrong and, frankly, it’s offensive to tell the American people you don’t trust them with their hard-earned savings.”

Rep. Maxine Waters, D-Calif., stated the Labor Department rule would prohibit conflicted investment advice that would cause low-income people “to lose their meager savings.” She added: “Whose side are you on? If you’re going to err, you should err on the side of the least of these.”

The bill was passed on a nearly straight party line vote, 34-25. It will not move to the House.

“The comment period has been extensive,” Representative Gwen Moore, D-Wis., said at the committee hearing. “What is the point of stopping the rule making in its tracks?”

One target of Ms. Wagner’s ire, Ms. Warren, also flexed her rhetorical and political muscles last week in defense of the DOL rule. In letters to the Brookings Institution and the DOL, she called into question a study by Robert Litan that is critical of the proposal.

Ms. Warren highlighted the fact that Mr. Litan’s analysis, which he conducted with Hal Singer, a principal at Economists Inc., was funded by Capital Group, a financial services firm. Ms. Warren asserted that the financial backing from Wall Street undermined the integrity and conclusions of the report.

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