Two House committees moved on Wednesday to advance proposals to block or overturn the Labor Department's fiduciary rule, the latest Republican-led assault on the controversial regulation.
Both measures passed along party lines, with Republicans carrying the day on a standalone measure that would repeal the regulation and an appropriations bill barring the department from enforcing the rule.
The House Committee on Education and the Workforce approved a bill that would erase the DoL rule, replacing it with a statutory obligation for advisers to make recommendations in their clients' best interests, but relying more heavily on disclosure to mitigate conflicts of interest. The Affordable Retirement Advice for Savers Act now heads to the full House for consideration.
"To be clear, we completely agree that Americans deserve retirement advice that's in their best interests," said Rep. Phil Roe (R-Tennessee), the author of the bill and a longtime critic of the DoL regulation. "But a rule requiring so-called 'sound retirement advice' achieves nothing if it means many people will no longer have access to retirement advice at all."
Roe, who called the fiduciary rule a "solution in search of a problem," argued that by imposing contractual requirements on commission-based practices and other conflicted types of advice, the Labor Department will drive scores of advisers to abandon lower-income savers as they shift their firms to fee-only models.
BILL TO BLOCK RULE
Then, in an all-day session in the same House office building, the Appropriations Committee approved a funding bill blocking the department from enforcing the fiduciary rule, the first phase of which took effect June 9. The second phase, which includes the controversial best interest contract provisions, has a scheduled implementation date of Jan. 1, 2018.
Rep. Tom Cole (R-Oklahoma) observed that riders such as the one blocking the Labor Department's fiduciary rule have been included in past appropriations bills, but have not survived final passage.
Those attempts, of course, came during the Obama presidency, when riders targeting singular administration priorities such as the fiduciary rule faced little prospect of making it into law.
"Our hope is a different administration means a different outcome in that regard," Cole said.
Some outside observers aren't betting on it.
"I guess my reaction is that we've seen this movie before," says Duane Thompson, senior policy analyst at fi360, a fiduciary training firm.
"Legislative riders on the DoL appropriations to knock out the DoL rule have been tried three to four times in recent years and all have failed," Thompson says. "Nor have any stand-alone bills to overturn the DoL rule that passed the House even had a hearing in the Senate."
Rep. Barbara Lee (D-California) blasted the attempt to overturn the DoL rule in a funding measure, arguing against both the process and policy of the GOP bill, which, she said, is "loaded with poison pill policy riders."
"We should not legislate on appropriations bills," Lee said, warning that conflicted advice can cost retirement savers billions of dollars a year. "Families won't be able to retire with dignity and enough retirement money after decades of work if this bill passes."
Meantime, the education and workforce committee's move to send Roe's bill, co-sponsored by Peter Roskam (R-Illinois), follows last week's discussion of still another House measure to kill the DoL's rule.
That proposal, like the measure advanced by Roe and Roskam, would grant advisers substantial leeway in providing investment recommendations, allowing for conflicts of interest — provided the adviser made satisfactory disclosures.
For investor advocates like Barbara Roper, director of investor protection at the Consumer Federation of America, those measures would create a lax standard of care that would actually leave savers more vulnerable to unscrupulous advisers than they were before the fiduciary rule took effect.
"Once you get past the rhetoric, it is clear that both the Wagner bill and the Roskam-Roe bill wouldn't just repeal the DoL rule, they'd weaken protections that existed before that rule was adopted," Roper says.
Some industry groups, on the other hand, heralded the bill for creating a best-interest standard of advice that wouldn't limit access to retirement products or investment advice. The Insured Retirement Institute, a prominent critic of the DoL rule, hailed Roe's bill for seeking to create a "workable" standard that would "require financial advisers to serve their client's best interests, and enhance transparency and accountability through clear, simple and relevant disclosure requirements."
Roper is dubious about the prospect of moving anti-fiduciary legislation through Congress, either as a standalone bill or through the appropriations process. The omnibus Financial CHOICE Act, which would repeal much of the Dodd-Frank Act and passed the House in June, also contains language that would put the brakes on the fiduciary rule.
But more likely the action will be at the department itself, Thompson and Roper suggest. The incoming heads of the DoL and SEC have both pledged to resume interagency collaboration on fiduciary issues, and Roper worries that that process could result in a watered-down best-interest standard along the lines of some of the legislative proposals that her group has panned.
"Ultimately, I'm at least as concerned over how the regulatory process could be used to do an end run around the DoL rule," she says, noting industry support for such a course. "Instead of getting a strong uniform standard for all investments, we'd get a weak, disclosure-based standard that would do nothing to protect investors from the harmful impact of conflicts."
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