The “stakes could not be higher” in a battle between the Obama administration and the financial services industry over a proposed rule to prevent conflicts of interest in retirement plans, Labor Secretary Thomas Perez said Tuesday.
Perez sought to make the case for administration’s effort to finalize the rule later this year amid tough opposition from the financial services sector.
Speaking at an event at hosted by the Hamilton Project in Washington, Perez took on industry objections to the rule his agency has proposed to make retirement investment plan brokers legally bound to act in their clients’ best interest.
Perez also made the issue personal, citing the example of a couple who he said were steered into a high-fee annuities by a bank investment broker who received kickbacks for doing so.
The White House has produced research finding that such conflicted advice costs savers $17 billion annually.
Registered investment advisers are already required to adhere to a fiduciary standard. The Labor Department rule would expand the requirement to brokers and others.
Industry representatives have argued that the rule would raise costs for retirement planners. Earlier this month, the Chamber of Commerce published a study finding that the rule would make it difficult for small businesses to offer tax-advantaged retirement plans for their employees, by burdening their brokers with new legal risks and compliance costs that would cause them to withdraw from the business. Nine million households are currently enrolled in such plans, according to the Chamber’s study.
But Perez on Tuesday forcefully pushed back on the idea that the rule would limit the options available to small businesses and their employees.
“Give those small savers my email address,” Perez said, according to a transcript of his remarks. “The bottom line is that this is a multi-trillion dollar market, there’s just no way industry will walk away from it.”
Perez predicted that “the new rule will be a catalyst for further innovation in the industry,” after planners figure out how to offer plans without engaging in conflicted advice.
The public can offer input on the rule through July 6. There will be a public hearing on the proposal during the week of Aug. 10, and then another two-week comment period after the transcript of the hearing is published.
