DOL fiduciary rule critic to lead House committee hearing on proposal

From 2015-17, Rep. Ann Wagner, R-Mo., led an aggressive campaign from the House of Representatives to kill the Obama administration fiduciary rule.

“We are at war with the Department of Labor,” Wagner told the audience at a 2015 National Association of Insurance and Financial Advisors event.

A federal appeals court later did the deed, vacating the fiduciary rule in a 2018 ruling. Fast forward five years and the industry's least-favorite rule is back, and so is Rep. Wagner.

She chairs the House Capital Markets Subcommittee, which will hold a hearing at 10 a.m. Wednesday on “Examining the DOL Fiduciary Rule: Implications for Retirement Savings and Access.”

The ranking member is Rep. Brad Sherman, D-Calif. Wagner left no doubt where she still stands with a press statement after the newest version of the fiduciary rule was released on Halloween.

"This proposal marks the Department of Labor’s fourth attempt to issue a 'fiduciary' proposal," Wagner said. "Each iteration of this decade-long effort has drawn significant investor as well as bipartisan Congressional concern."

The witness list for Wednesday's hearing is decidedly anti-fiduciary rule: Bradford Campbell, partner, Faegre Drinker; Susan Neely, president and CEO, American Council of Life Insurers; Jason Berkowitz, chief legal and regulatory affairs officer, Insured Retirement Institute; and Marc Cadin, CEO, Finseca.

The hearing will be livestreamed.

Fiduciary rule, part IV

Rolled out with a press conference by President Joe Biden, the newest fiduciary rule continues to drumbeat from the DOL to hold all retirement advice to the toughest standard. At 494 pages, the rule makes changes to transaction exemptions that would essentially make all rollover recommendations fiduciary. The rule also eliminates many forms of compensation to agents and advisors.

Two words, in particular, are likely to determine whether this fiduciary rule stands: trust and confidence. The 2018 decision by the Fifth Circuit Court of Appeals vacating the fiduciary rule examined the common law meaning of the word “fiduciary.” It requires a relationship of trust and confidence, and determined that Congress codified that common law meaning in the statutory text.

Administration officials repeatedly mention "trust and confidence" in both the rule text and their public comments since its release. Their challenge is to shoehorn an agent's one-time sale of an annuity into the established understanding of a relationship of "trust and confidence" between an advisor and client.

These topics, and many others, are likely to be raised during Wednesday's hearing. If the department is successful in enacting a fiduciary rule, industry opponents say it will severely limit access to financial advice for middle-market Americans.

Wagner sought alternative

Wagner sponsored legislation in 2017 to eliminate the Obama fiduciary proposal, and its prohibited transaction exemptions as well. Her bill, which didn't go anywhere, would have created a new advisory standard somewhere between fiduciary and suitability.

It would have amended the Securities Exchange Act of 1934 to include a best interest standard of care for brokers advising investors in the retail market. DOL rules only cover anyone working with retirement accounts.

Under Wagner's 2017 proposal, an investment recommendation would satisfy the best interest standard if it reflected “reasonable diligence” on the part of the agent/advisor. Her definition of "reasonable diligence" would be modeled on FINRA's existing definition.

Likewise, agents/advisors would need to exercise reasonable “care, skill, and prudence,” based on a customer’s individual investment needs, a draft of the bill stated.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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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]. Follow him on Twitter @INNJohnH.