Americans for Annuity Protection (AAP) has been resolute and forceful in our opposition to the Department of Labor’s fiduciary rule because it is too complex, too costly and too confusing for consumers. We remain steadfast in our fight.
Given that the elections were just over a week ago, AAP believes it’s a bit premature to comprehend fully, let alone predict, what a Trump administration or a Republican Congress will do about the fiduciary rule. But,that hasn’t stopped many in the industry or the trade media from partying like there is no tomorrow because of Trump’s campaign advisor’s pledge to “kill the DOL rule” and Trump’s own pledge to rein in administrative rulemaking.
Unfortunately, using campaign promises as predictors of outcome is a little like believing in Santa Claus after your older sibling or classmate tells you he isn’t real. We want to believe because we like the belief.
History tells us that campaign promises are meant to be broken. Not because anyone lacked good intentions to keep the promise, but because the reality of governing is nothing like running a campaign. From George H.W. Bush's promise of “Read my lips: no new taxes” in August 1988 to Barack Obama’s promise to “immediately close Gitmo” in November 2008, presidents often are forced to break promises.
Both presidents were hampered by a Congress controlled by the opposing party, and that makes it harder to keep promises. However, even presidents who enjoyed a Congress in the hands of his own party were forced to break promises because of political priorities, polling or power-struggle realities.
There are some who advise that the best course of action to understand a candidate’s commitment to a policy position is to dig through that candidates previous policy positions while they served in public office. With President-elect Trump, we don’t have that luxury.
Any change to the DOL rule – repeal, dismantle/fix, stall – will require action by the legislative, administrative or judicial branches, and could require action by more than one of those branches. The fate of the two remaining court actions is unknown and in the hands of judges appointed by Presidents Clinton or Obama. Meanwhile, the National Association for Fixed Annuities vows to appeal the ruling from the U.S. District Court for the District of Columbia that upheld the rule.
We cannot control the judicial outcomes and we have little insight into Trump’s governing style or his top policy expert picks. Therefore, AAP believes it would be instructive to look at our legislative branch and determine the strategy that has the best likelihood of success in defeating the rule.
In the House, there has been much deliberation and several bills passed regarding the rule. In October 2015, H.R. 1090, the Retail Investor Protection Act, passed in a 245-186 vote after its mainly Republican backers argued that the DOL’s proposed fiduciary rule was overly restrictive, hurting retirement advisors’ ability to do their job as well as hurting some retirement savers’ access to personalized retirement advice. Lawmakers also criticized the DOL for stepping on the Securities and Exchange Commission’s regulatory turf with the rule.
In September 2016, the House Financial Services Committee passed the Financial CHOICE Act in a party line vote. The sweeping financial reform bill seeks to replace the Dodd-Frank Act and kill the Department of Labor’s fiduciary rule. Among the many changes the bill proposes, it would block the DOL from implementing its new fiduciary rule by requiring the SEC moves first before the DOL can act.
The Senate has been just as busy and will be the tougher chamber to convince without a supermajority and with a narrow 51-48 split between Republicans and Democrats respectively (with one seat outstanding that will be determined by the Louisiana runoff election in December). On Feb. 4, three senators introduced legislation to stop the rule. Unfortunately, Sen. Elizabeth Warren, D-Mass., remains vocal and adamant in her agenda against the financial services industry.
A measure written by Sen. Johnny Isakson, R-Ga., would require Congress to approve the DOL rule before it goes into effect. In the likely event the rule fails to win enough votes, it would be replaced by a best-interest standard outlined in Isakson's bill, the Affordable Retirement Advice Protection Act. A similar bill, Strengthening Access to Valuable Education and Retirement Support Act, was introduced.
On a third track Thursday, Sen. Roy Blunt, R-Mo., introduced a bill that would require the DOL to halt its rule until the SEC acts on a similar regulation that would establish a uniform fiduciary duty for all retail investment advice.
These bills all essentially acknowledge the advisability of a uniform fiduciary duty but either define what that means or require that the regulation be developed by the SEC. Mary Jo White, head commissioner at the SEC, has announced her plans to leave the SEC in January and openly acknowledges she lacks consensus to move forward before her exit. So where does that leave us?
AAP continues to believe our best, most efficient and time-saving strategy is through the appropriations process. We advocated that the 2016 budget withhold funds for the rule’s implementation but lost that battle due to strong opposition led by an empowered president and Senate. But there’s a new sheriff in town and that means new opportunity.
Americans for Annuity Protection’s strategy will be to advocate for a temporary budget that is designed simply to keep the government running through President-elect Trump’s inauguration on Jan. 21, 2017. The temporary budget should not include any restrictions on appropriations to implement the rule because it would face certain veto from President Obama.
In early 2017, AAP will advocate for a new budget the does not appropriate the necessary funds to implement the rule. House Speaker Paul Ryan has adamantly opposed the DOL rule and has called it a “one-size-fits-all regulation that will restrict access and increase costs for Americans planning for retirement.” AAP will capitalize on its already forged relationships with Speaker Ryan and Sen. Ron Johnson, R-Wis.
The industry continues to move forward and prepare to comply with the rule because of the uncertainty of obtaining a delay, repeal or replacement. To not prepare and be caught with some or all of the rule’s requirements would be irresponsible.
AAP’s strategy, when successful, will provide us all with the earliest opportunity for more certainty and will effectively neuter the rule – in particular, the unworkable, confusing and highly problematic Best Interest Contract and 84-24 exemptions. So, stay tuned, stay engaged and stay active! Visit www.aapnow.com for updates on our strategy and our latest calls to action.
Kim O’Brien is the vice chairman and CEO of Americans for Annuity Protection. She has 35 years of experience in the insurance industry. O’Brien served The National Association for Fixed Annuities (NAFA) for almost 12 years and led the organization to defeat the SEC’s Rule 151A.
Contact Kim at [email protected].
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