Washington, D.C. – Financial firms and lobbyists that have publicly declared their support for a best interest standard for investment advice, but support bills that would weaken existing protections for retirement savers, according to a new analysis from the Consumer Federation of America (CFA).That analysis is based on a side-by-side comparison of the Department of Labor’s conflict of interest rule proposal, Section 913 of the Dodd-Frank Act, which authorizes the SEC to adopt a uniform fiduciary standard for investment advice about securities, and bills currently under consideration in Congress that purport to offer a “more workable” alternative to the DOL rule proposal.
The analysis is being released as the House Education and the Workforce Committee prepares to mark up companion bills that would codify loopholes in current regulations and weaken the standard that applies to retirement investment advice – H.R. 4293, the “Affordable Retirement Advice Protection Act” (introduced by Rep. Phil Roe), and H.R. 4294, the “Strengthening Access to Valuable Education and Retirement Support Act” (introduced by Rep. Peter Roskam). The Roskam and Roe bills have been endorsed by industry groups like SIFMA, ICI, FSI, and others that have strongly opposed the DOL rule proposal.
“Financial firms and their lobbyists claim to support new regulations to ensure that all financial professionals are required to act in their customers’ best interests when providing investment advice. And they frequently point to Section 913 of the Dodd-Frank Act as providing an appropriate framework for such a standard,” said CFA Director of Investor Protection Barbara Roper. “But actions speak louder than words,” Roper added, “and these same groups have adamantly opposed the DOL rule proposal, which is consistent with the 913 framework, while embracing alternatives, such as the Roskam and Roe bills, that fall far short.”
As the CFA analysis documents:
- Industry groups claim to believe that all financial professionals should be subject to a best interest standard. But they support the Roskam and Roe bills, which codify loopholes in the definition of retirement investment advice that enable advisers to avoid their fiduciary obligations. And they oppose the DOL rule proposal to close those loopholes.
- Industry cites Section 913 of the Dodd-Frank Act as providing an appropriate framework for imposing a uniform fiduciary standard. But they oppose the DOL rule proposal, which adheres to that framework, as our analysis makes clear, while endorsing the Roskam and Roe bills, which take a radically different and much less protective approach.
- Although they claim to support a best interest standard, those same industry groups fight to maintain their right to engage in harmful sales practices that encourage and reward advice that is not in the customer’s best interest. The Roskam and Roe bills would continue to permit these harmful practices. The DOL rule proposal would not.
“The Roskam and Roe bills simply do not measure up to the standards that Congress set forth in Section 913 as providing appropriate protections for recipients of investment advice. Members of Congress who strive to uphold those standards should oppose the Roskam and Roe bills and embrace the DOL proposal,” said CFA Financial Services Counsel Micah Hauptman.
Contact: Barbara Roper, (719) 543-9468; Micah Hauptman, (202) 939-1004
The Consumer Federation of America is an association of nearly 280 national, state and local pro-consumer organizations that was established in 1968 to advance the consumer interest through research, education and advocacy.