All 401(k) industry and IRA industry eyes turned to Washington yesterday for a Congressional hearing on the Department of Labor's (DoL's
) proposed redefinition of fiduciary. After five years of fiduciary reg debate, where is the solution? That seems to be the question for many 401(k) industry leaders and members of Congress alike.
As initially reported on our sister publication, 401kWire
, the House Financial Services Capital Markets and Oversight subcommittees held a joint hearing, titled Preserving Retirement Security and Investment Choices for All Americans
, on the DoL's proposed conflicts of interest regulations and their ambiguous definition of 'reasonable' concerning the fiduciary rule.
The hearing consisted of one panel lasting nearly two and a half hours with witnesses from industry leaders and other financial professionals. The panel included statements and remarks from:
Caleb Callahan, senior vice president and chief marketing officer at ValMark Securities, on behalf of the Association for Advanced Life Underwriting
Mercer Bullard, MDLA Distinguished Lecturer and Professor of Law, University of Mississippi School of Law
Julia McNeely, president of the National Association of Insurance and Financial Advisors
Paul Schott Stevens, CEO and president of the Investment Company Institute and
Scott Stolz, senior vice president of PCG Investment Products at Raymond James &
From yesterday's hearing, it is not clear that committee members and the panelists agree on the same solution, but most seem to see the current proposal as unworkable. ICI projected the actual costs of the proposed bill to be north of $17.5 billion and no one has challenged or discounted those numbers, Stevens testified.
Financial professionals seem to disapprove of one narrow solution to the problem, like robo-advisors. Hearing participants told stories about how their elderly family members would interact with robo-advisors if they are merely adapted to a cell phone.
"One-size fits all is a mistake," said McNeely, but then followed up with the idea of a broad approach across the board and only making narrower decisions later -- in the best interest of the client, of course. "Let's have millions of people rely on robo-advisors," Mr. Stevens said jokingly, "it does not make sense."
Many of the congressman and panelists reiterated their discontent with the five-year long, drawn-out process of making some progress, partly (or mostly) on the shoulders of the SEC. One panelist even pointed out that the DoL shouldn't be the last of everyone to be testifying on this rule.
Congressman French Hill
(D-Arizona) simply said that the DoL needs to 're-propose' this rule, while many others in attendance agreed.
Congresswoman Ann Wagner
(R-Missouri) has been leading the pack to protecting American's retirement and investment options, and her bill H.R. 1090 is intended to stop the proposed fiduciary rule. Wagner just recently wrote a letter
to Labor Secretary Thomas Perez
displaying her discontent for the bill and its plan to segregate those Americans who could afford a financial advisor and those who could not.
Wagner concluded the hearing with "we will fight on."
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