The House voted 245-186 Tuesday for legislation that would effectively stop the Labor Department from a planned crackdown on conflicts of interest in retirement financial advice.
“This rule from the Department of Labor is bad, let’s fix it with this bill,” said Rep. Sean Duffy, R-Wis., during debate on the House floor Tuesday.
The bill, authored by House Financial Services Committee member Rep. Ann Wagner, R-Mo., would prohibit the Labor Department from finalizing its rule until the Securities and Exchange Commission acted on retirement advice rules. In doing so, most analysts expect it would shelve regulatory action indefinitely.
By passing the legislation to stop the Labor Department, the House staked out its opposition to one of President Obama’s top priorities for his late presidency, and sided with business groups that have lobbied heavily against the rule.
The White House issued a veto threat for the legislation earlier in the week, and the Senate is not expected to pass the legislation.
The rule, favored by congressional liberals such as Massachusetts Sen. Elizabeth Warren, would expand the category of financial advisers required to act in their clients’ best interest.
Today, many advisers who help clients with tax-privileged retirement plans such as 401(k)s and investment retirement accounts are not held to that legal standard, known as the fiduciary standard.
Instead, the White House believes, it is common for advisers to steer clients into high-fee financial products for which the advisers receive some form of compensation. Such practices can erode workers’ retirement savings.
“Labor’s ongoing rulemaking is designed to protect the retirement savings of millions of workers and retirees by ensuring that paid advisers and other entities do not place their own financial interests over those of their customers,” the Office of Management and Budget said Monday. “This legislation puts a roadblock in the way of preventing such harmful conflicts.”
The industry, however, has argued that expanding the fiduciary standard would make it prohibitively expensive for many advisers to help their clients, cutting off many people from financial advice.
By passing legislation to stop the bill, said Rep. Scott Garrett, R-N.J., the House is trying to “prevent the Department of Labor from worsening the retirement crisis this nation is facing.”
Many in the financial services industry and in groups that favor the rule expect it to be finalized later this year or early next year and to be in force before Obama leaves office.
