The jockeying has begun over the Labor Department’s proposed rule to prevent investment advisers from accepting kickbacks for steering clients toward certain products.
Sixteen financial industry groups sent the Labor Department a letter Wednesday afternoon asking for regulators to slow down the rulemaking, arguing that more time is need to analyze the proposal than the 75 days scheduled.
Meanwhile, a coalition of five activist groups boasted that they had collected 225,000 signatures urging the government to proceed with the aggressive rule, just a little more than a week since the White House and Labor Department announced that they would move forward with it.
The rule would require that brokers and investment advisers adhere to a fiduciary standard, meaning that they are legally required to act in their clients’ best interests.
Currently, most brokers and many investment advisers are not held to that standard.
President Obama’s Council of Economic Advisers released a report in February saying that retirement advisers steer clients into high-fee investment products while receiving “backdoor payments or hidden fees” for doing so.
Such conflicts of interest cost U.S. families $17 billion in lost investment income earnings each year, Obama’s economic advisers found, as fees eat into investment gains.
In one example given in the report, “if a worker has $100,000 in retirement savings at age 45, without conflicted advice it would grow to an estimated $216,000 by age 65 adjusted for inflation, but if she receives conflicted advice it would only grow to $179,000 — a loss of $37,000…”
The financial industry trade associations, however, told the Labor Department in their letter that the complicated rule would be a “watershed event” for the industry and that 75 days was inadequate to respond.
The groups signing the letter include the Financial Services Roundtable, the American Bankers Association, the Securities Industry and Financial Markets Association and the U.S. Chamber of Commerce.
The industry has warned, since Obama called for a rule in February, that requiring advisers to meet a fiduciary standard would impose legal costs on the profession, causing some advisers to be unable to offer people retirement advice.
The petitions submitted by activist groups, however, called on the Labor Department to oppose any effort to delay or weaken the measure.
“Only those whose perception is skewed by greed could possibly think this is a bad idea,” said Anna Galland, executive director of the group MoveOn.org Civic Action, which ran one of the campaigns.
She added that the group will support proponents of the rule, including prominently Sen. Elizabeth Warren, D-Mass., “to ensure this common-sense approach isn’t stymied by high-paid lobbyists and corporate interests who would rather enrich themselves than do the right thing.”
The Labor Department proposed a similar rule in 2010, only to withdraw it in the face of heavy lobbying.
