In remarks on the House floor today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, led Democrats in opposition to H.R. 1090, the so-called Retail Investor Protection Act, a measure that would stall the Department of Labor’s rulemaking establishing critical consumer protections from conflicted investment advice.
The top Democrat outlined the Department’s efforts to address concerns from the general public, including a 164-day comment period, four days of public hearings, and over 100 meetings with stakeholders. Waters also discussed the need for the rule, which has not meaningfully updated in the last 40 years and costs hardworking Americans an estimated 17 billion dollars annually.
Waters’ statement is below.
“Mr. Chairman, I yield myself as much time as I may consume.
H.R. 1090 would halt the Department of Labor’s ongoing efforts to protect American retirement savers from investment advice that conflicts with their best interests.
The bill would prohibit the Department from promulgating any rule on the issue until 60 days after the Securities and Exchange Commission (SEC) finalizes its own fiduciary rule for investment advisers and broker dealers. The bill would then delay the SEC’s long overdue rulemaking by requiring the Commission to first report to Congress a separate economic analysis that, among other things, considers how a new standard would affect a broker’s profits.
These delays are unacceptable and ignore the real issue that the Department is trying to address —conflicted retirement investment advice that costs our nation’s workers and retirees an estimated $17 billion each year. The Department’s rulemaking would do so by requiring persons providing retirement advice to put the interests of their clients ahead of their own and abide by a fiduciary duty—the same duty that we expect from our doctors, lawyers, and trustees.
Simply put: a financial advisers should not be paid more for recommending one product over another, but should abide by a fiduciary standard of care.
Would you be comfortable if your doctor was paid more for an office visit for recommending one drug over another? Or for a lawyer to be paid more for interpreting the law one way or another? No, of course not.
And yet, we allow these same conflicts to exist with those that are providing millions of hardworking Americans with advice on their retirement savings. These conflicts encourage advisers to, for example, push a 70-year-old retiree to invest more of her savings in a stock fund, rather than a less risky short term bond fund, simply because the adviser receives 150% more for making the riskier recommendation.
Such a common sense update in the law to address these conflicts is long overdue and, indeed, at the Department, is over 5 years in the making. During that time the Department has published an initial 2010 proposal, solicited feedback and held public hearings on that proposal, and issued a re-proposal this past spring. Since that re-proposal was published, the public and interested stakeholders have had 164 days of public comment, four full days of multi-panel public hearings, and ample opportunity to meet with the Department, which held over 100 meetings with interested stakeholders, not including meetings with Members of Congress.
Thanks to the Department’s diligence and willingness to listen to stakeholder concerns, the proposal now enjoys broad support, including support from 95 financial services groups; public interest, civil rights, and consumer organizations; labor unions; and many investment advisors, who are already providing advice to savers under a fiduciary standard. These groups range from the AARP, Public Citizen and the Consumer Federation of America to the Financial Planning Coalition, among many others.
All of this points to the Department’s tangible efforts to take a balanced, measured approach to developing a rule that works. And I fully support their efforts to continue to work toward its completion, not only because it is necessary, but because it just makes common sense.
What’s more, the need to update the law quickly is urgent Hardworking Americans lose an estimated $17 billion dollars per year – or $47 million per day – to conflicted retirement investment advice.
And while we should clearly encourage the Securities and Exchange Commission to also update its own rules on investment advice over securities, we should not make retirement savers wait any longer for protection by hinging the DOL’s rulemaking to the SEC’s, as H.R. 1090 would do.
I support the Labor Department’s efforts to finalize a rule, and urge my colleagues to vote NO on H.R. 1090.