Bipartisan Congressional Letter to DOL Expresses Concern with Investment Advice Rule
A Jan. 8, 2024, bipartisan letter from 50 members of the House of Representatives expressed concerns with the Department of Labor’s proposed investment advice rule, commonly referred to as the fiduciary rule, announced by President Biden in October 2023 and published in the Federal Register on Nov. 3, 2023. The House members stated the proposal, which was previously referred to as the “Conflicts of Interest in Investment Advice,” includes unnecessary and counterproductive changes to the existing regulatory framework governing the conduct of financial professionals who provide personalized investment advice to retirement savers under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986.
House members urged the DOL to cease its efforts to adopt the “Retirement Security” rule and avoid impairing the ability of American workers and retirees to obtain affordable financial professional help to prepare for and achieve a secure retirement.
Kicking off a week that will also entertain today’s hearing, the letter was submitted to Julie Su, acting secretary of Labor, and Lisa Gomez, assistant secretary of the Employee Benefits Security Administration. Rep. French Hill (R-Ark.) and Rep. David Scott (D-Ga.) led efforts on the letter.
In support of the letter’s position, authors noted the changes could cause a significant number of financial professionals, who currently serve a broad range of customers including lower- and middle-income workers, to switch to providing service as investment advisers rather than as insurance agents or registered representatives of a broker-dealer. This is the case because the proposals in 2016 and 2023 impose more burdens on broker-dealers and insurance representatives than on investment advisers. Investment advisers charge ongoing advisory fees and impose account minimums that low- and moderate-income workers and retirees may not be able to afford.
The letter stated that “a study of the 2016 fiduciary rule found that more than 10 million smaller retirement account owners lost the ability to work with financial professionals. A more recent analysis found that if DOL adopts a new rule that is similar to the 2016 rule, the retirement savings of 2.7 million individuals with incomes below $100,000 would plummet by $140 billion over 10 years. The analysis also found that people of color, particularly Black and Latino retirement account owners would be among the hardest hit, increasing the racial wealth gap by 20 percent.”
In the years since the 2016 fiduciary rule was vacated, the letter cited that regulators at the federal and state levels have implemented regulations that directly address the conflicts of interest that DOL asserts it is seeking to address with this new proposed rule to level the playing field. House members urged DOL to instead focus its efforts on implementing retirement security provisions enacted by Congress in recent years through the SECURE Act and SECURE 2.0 Act.
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