WASHINGTON – The night before the Department of Labor unveiled its long-awaited fiduciary rule, Sen. Cory Booker (D-N.J.) walked over to the reflecting pool on the National Mall and up steps of the Jefferson Memorial at about 10 p.m.
Despite the late hour, the site was crowded with visitors, many of whom were reading aloud portions of the Declaration of Independence. One quote, in particular, jumped out at Booker, who had been involved with the rule since 2013. Americans "mutually pledge our lives, our fortunes, and our sacred honor."
For Booker, the fact that many advisors had not been legally required to place their clients' financial interests before their own "is an assault on the ideals of this country."
The new fiduciary rule requires just that of planners who advise on retirement assets. Its supporters hope it will reduce, or eliminate, the $17 billion that the White House Council of Economic Advisors estimates investors lose every year to conflicted financial advice.
In an exclusive interview with Financial Planning, just moments after the Labor Department’s fiduciary announcement on Wednesday, Booker described the “blocking and tackling” required to see the rule through, the opposition he expects, and the impact of the rule on advisors and the industry.
When did you begin to consult on the rule?
As soon as I got into the Senate [in 2013]. The secretary and I have a really good relationship. Given the retirement crisis we have in our country, I started talking to him and other administration officials about it early on. … I know CEOs of some of these [financial] companies. There's one in particular whose name I don't want to mention [who heads] a massive insurance company. He had some concerns that were legitimate concerns because [insurers] have different rules for their products and different challenges than a big bank might have. And so we were able to make a connection between the secretary and this leader so that they could talk.
There's a lot of talk about wealth disparity in this country. Could this rule do anything to partly bridge the gap between the wealthy and the poor?
[The amount Americans lose to conflicted advice annually] could be the difference between, really, destitution and poverty, versus having security. … What's so offensive about the disparities right now is not that the rich have so much; it's that the poor have so little that they cannot live lives of dignity and decency.
What kind of opposition to the rule do you anticipate going forward?
This is a very powerful industry that has tremendous influence on the Hill and a lot of people are going to be swayed by that. That's why I've been pushing for the last two-plus years that I've been in Congress to resist those efforts to undermine the integrity of this rulemaking. [There have been] a lot of compromises but also, frankly, a lot of taking industry's input well into hand.
What do you think the impact of this rule will be on the industry and on advisors?
It gives a whole new aura of trust to this industry. I think it is actually going to be very good for business because the more people trust, the more likely [they will be] to engage [advisors'] services. People are going to find out that this is something that really benefits them. It's like the auto industry fighting seat belts and then, all of a sudden, the auto industry is advertising their safety.
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