Senator Elizabeth Warren (D-Mass.) released a letter falsely stating that financial firms support the controversial fiduciary rule.
The Department of Labor’s Fiduciary Rule heightens the legal scrutiny of advising retirement account holders. Warren released a letter claiming that 30 financial firms support the regulation. However, many industry professionals believe to the contrary.
U.S. Bancorp, Wells Fargo, Charles Schwab, and other financial firms support the “intent” of the rule to better aid retirement account holders, though their explicit support is missing from the letter. Warren’s letter conflates the financial firms’ ability to comply with the Fiduciary Rule as enthusiastic support of the law.
John Taft, retired CEO of RBC Wealth Management, sent a letter to Warren to dispel financial firms’ apparent support for the regulation. “Let’s be clear,” he wrote. “While many leaders of the wealth management industry agree that the time has come for a fiduciary standard, few would pass up the opportunity to replace the Labor Department’s approach with a better one.”
John Berlau, a senior fellow at the Competitive Enterprise Institute, argues that Warren conceals the low level of support for the regulation. He said, “Now Warren is engaging in similar tactics by writing letters to brokerage firms asking if they will be in compliance with the fiduciary rule when it goes into effect. She is pointing to their affirmative answers—firms generally comply with laws rather than risk penalties—as evidence that they are fine with the fiduciary rule and there is no need to delay or rescind it.”
Analysis from the American Action Forum states the Fiduciary Rule will cost $31.5 billion. The Fiduciary Rule holds retirement advisors to higher legal scrutiny, which forces account holders into fee-based accounts instead of commission-based accounts. Many lower account balance holders will be pushed out of advisory service entirely.
Warren concluded her letter, “The overwhelming voice of financial firms is clear: they support the goals of this rule; they have invested in this rule; they have planned for this rule; and they will be ready by the April deadline.”
President Trump signed an executive order on February 3 to ask the Labor Department to revise or revoke the Fiduciary Rule. Before Trump signed the executive order, Press Secretary Sean Spicer said, “The rule is a solution in search of a problem. There are better ways to protect investors, and the Trump administration is taking action to do so.”
Former Congressman Kenneth E. Bentsen, Jr. dispelled Warren’s assertion that financial firms support the fiduciary rule, saying:
Over the last several days there has been a fair amount of chatter around the Department of Labor’s pending fiduciary rule, which we believe could make retirement saving harder for many Americans. I’d like to set the record straight. … First, the industry has been working diligently over the past eighteen months to prepare to comply with the rule before it becomes applicable on April 10, 2017. Our member firms have undertaken this effort not because we agree with the rule, either in whole or in part, but rather if it’s the law, we comply. The industry will endeavor to undertake what its regulators task it to do, but that doesn’t mean the rule is without flaws (it isn’t), or that the implementation timeline wasn’t realistic (it wasn’t), or that the implementation timetable demanded by the rule won’t have consequences (it will).