The last decade has been particularly difficult for our nation’s workforce and retirees. The economic downturn really did significant damage to the stock market and many people’s retirement plans took a hit. This situation put an even greater emphasis on the importance of having sound financial advice.
Saving for retirement should be easy. There is bipartisan agreement in Congress that every American should have access to high quality, affordable retirement advice. This advice should always be in the best interest of the consumer.
Unfortunately, a newly finalized rule by the Department of Labor threatens to make saving for retirement harder. In fact, the rule could upend some families’ access to retirement advice and would likely put some small financial firms out of business.
The official mission statement for the Department of Labor’s is to “foster, promote, and develop the welfare of wage earners, job seekers, and retirees of the United States.” Sadly, the newly announced “fiduciary” rule seems to stand in direct contrast to this goal. Let me explain.
Generally speaking, a “fiduciary” is someone who is responsible for managing the assets of another person, or group of people. People who work in these roles are already subjected to numerous government regulations and requirements.
This rule will impose new standards and regulations while also expanding the definition of who is required to comply. In other words, it adds more red tape while also subjecting even more people to regulation. Studies have found the increased compliance costs could be over $2 billion. As I have mentioned before, the costs of compliance are almost always passed on to the consumer in the form of higher prices and fees.
The people who are going to be hit the hardest by these changes will be low- and middle-income families who arguably need sound financial advice the most. Due to the highest costs, they may no longer be able to afford the services.
Just as bad as increasing costs, the rule may also limit choices for those who are trying to save for retirement. Small businesses, who often have a smaller portfolio, will be the ones who likely suffer the most under a decrease in options.
Don’t get me wrong: companies and organizations that give bad financial advice or don’t act in the best interest of the consumer deserve to be punished. But there is a way to ensure the bad actors are punished without hurting everyone else in the process. We shouldn’t just accept these “unintended consequences.”
Prior to the release of this rule, numerous Members of Congress, including Republicans and Democrats, contacted the Department of Labor to express our concerns. Sadly, many of our concerns were simply ignored.
As a member of the House Education & Workforce Committee, I’m committed to finding solutions to this overreach. I was proud to vote in favor of the Retail Investor Protection Act, which passed the House in October. This bill would have required the that stakeholder input be gathered before any rule could go into effect. Unfortunately the Senate didn’t take up this legislation before the rule came out.
I’ve also co-sponsored the Affordable Retirement Advice Protection Act and the SAVERS Act. These bills ensure retirement advisors act in their clients’ best interest while preserving low- and medium-asset savers and small businesses have access to affordable retirement advice. I’m pleased to see these bills have bipartisan support, and I hope the House acts on them soon.
At a time when studies show that nearly half of America is not saving adequately for retirement, it’s important the federal government be increasing – not decreasing – access to responsible retirement advice.
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Bradley Byrne is a member of U.S. Congress representing Alabama’s 1st Congressional District.