Faced with legislative pressure to slow momentum toward an expanded fiduciary rule, a defiant Labor Secretary Thomas Perez brushed aside criticism in a new letter.
Tensions over the conflict of interest rule – heightened this week by a four-day public hearing – played out in an exchange of letters. In recent days, 12 Democratic senators have joined their Republican colleagues in urging the DOL to reconsider the current rule.
“We are hearing a number of thoughtful concerns from stakeholders about the re-proposed rules and we believe the guidance can be improved and enhanced,” reads a letter from eight Democratic members of the Senate Finance Committee.
Four other Democratic senators, as well as various House members from both parties, sent similar letters last week. Perez responded to a letter from Rep. Ann Wagner, R-Mo., a leading opponent of the fiduciary rule.
He cited a “shift in attitude over the past few years” and “a recognition of the growing problem of conflicted advice, a desire to create a level playing field, agreement of the simple premise of putting the client’s best interest first and a ‘get to yes’ attitude that will lead to a meaningful and workable rule.”
The DOL failed an initial attempt to expand fiduciary standards in 2010. This time, the department has said it is open to revising the rule based on feedback. But Perez said he is committed to the final goal.
“When I became labor secretary two years ago, I committed to slowing down the process to ensure that all voices could be heard,” Perez wrote. “We will move forward with issuing a final rule that balances the input we have received.”
In April, the DOL proposed new conflict of interest rules and six proposed prohibited transaction exemptions governing advice provided regarding qualified retirement employer-sponsored plans and individual retirement accounts.
DOL officials and public interest groups say the proposed rules, which would impose a fiduciary standard of care on financial advisors dealing with retirement accounts, are necessary to protect retirement investors from high commissions.
Advisors who are already required to meet a suitability standard of care say the rules are unworkable, will raise costs and shrink the supply of advisors as they reposition themselves away from Main Street retirement investors and toward wealthier clients.
The Obama administration is pushing for the new rules before the president leaves office in January 2017. Gaining the votes of 12 Democratic senators improves the chances that opponents can block the any changes with veto-proof legislative action.
A similar route was successful five years ago, when Sen. Tom Harkin, D-Iowa, introduced an amendment blocking the SEC from regulating fixed index annuities. That forced the SEC to shelve Rule 151A.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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