The Department of Labor (DOL) has finalized rules that require financial advisers who help people make investments for retirement to put their clients’ interests ahead of their own. But House Republicans aren’t letting the rule go into effect without a fight.
On Thursday, the House voted on a resolution that would effectively block the new rules, which require advisers to adhere to a “fiduciary standard,” that passed along strict party lines, with 234 Republicans voting yes and 183 Democrats voting no. Republicans claim that the rule will make investment advice more expensive, with Rep. Phil Roe (R-TN), a sponsor of the legislation, saying it would “protect access to affordable retirement advice.” They’ve also characterized the rules as government overreach, with House Speaker Paul Ryan (R-WI) calling them “Obamacare for financial planning.”
Their position mirrors that of the financial industry, which has fought the rules with claims about the impact they could have on their businesses that Sen. Elizabeth Warren (D-MA) has questioned as being disingenuous. Ahead of the House vote on the resolution, eight big financial industry trade groups sent a letter to lawmakers urging them to vote in favor of the resolution.
The vote, however, is a largely symbolic move. For the resolution to have any power, it would have to be taken up and passed by the Senate, and President Obama would have to sign it. But he’s already threatened to veto the measure. DOL Secretary Thomas Perez called Thursday’s vote “a waste of time.”
Before the new standard, advisers were only required to give “suitable” advice, which left the door open for them to steer clients into products that made the advisers more money but weren’t the best option. That practice was costing Americans an estimated $17 billion a year in conflicted advice, according to the White House. Some people say their finances, particularly their chances of retiring comfortably, have been destroyed by bad advice and that they would have simply been better off without it.
Americans have little wiggle room for losing money when it comes to saving enough for retirement. Pensions, which guarantee payments in old age, have been overwhelmingly replaced with 401(k)s, which require individual workers to make smart investment choices in order to have enough to live off of when they stop working. And by and large workers aren’t putting enough aside. The gap between what they should have saved up and what they’ve actually put away is $6.6 trillion. Meanwhile, about 60 percent of working age people have no retirement savings at all.