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Removing Barriers Blog

House Ways and Means Committee Holds Hearing on DOL Fiduciary Proposal
Posted October 01, 2015 by CUNA Advocacy

Yesterday, the House Committee on Ways and Means Subcommittee on Oversight held a hearing on the Department of Labor’s (DOL) proposed fiduciary rule. CUNA sent a letter for the record earlier this week applauding the subcommittee for holding the hearing to examine the proposal, which adds brokers and advisers providing advice to Individual Retirement Accounts (IRA) to the definition. 

CUNA’s letter expressed support for the broader goal of protecting investors and encouraging all advisors to act in an investor’s best interest. However, it noted that CUNA believes that as proposed, the rule may cause more harm than good and leaves credit union members with fewer options and more confusion. The letter urged Congress to consider how the DOL’s proposed rule may affect a consumers’ ability to participate in retirement and savings plans. Specifically, CUNA expressed concern about the impact this proposed rule will have on credit unions because they often serve a different demographic than some of the conglomerate investment firms. Credit unions seek to provide investment services to their members of all means, rather than only focusing on high net-worth clients. 

During the hearing numerous Members of Congress expressed similar concerns as CUNA about how this rule will impact middle-class Americans. Witnesses and Members of Congress alike lamented that options to learn about retirement and savings could be curtailed as a result of the rule. 

In his opening statements, Rep. Pete Roskam (R-IL) said, “The rule would essentially hold anyone giving retirement investment advice of any kind to the standards of a fiduciary, with all of the legal implications and complexity that entails. The reason we don’t have such a standard right now is because it would make it extremely difficult for people to access financial advice without having to pay costly fees. Small businesses, low- and middle-income families, and under-served communities would be hurt by this rule far more than the wealthy. That is because the majority of small investors use financial advisors called broker-dealers, who typically work on a commission basis instead of charging fixed fees up front.”

Rep. Jason Smith (R-MS) specifically raised concerns that the rule could be harmful in encouraging more people to save and prepare for retirement, such as millennials. And, Rep. Jim Renacci (R-OH) argued that there are good investment advisors out there and this rule could “take away” from small accounts. Democrats also referenced the letter Rep. Gwen Moore (D-WI) organized which also expresses concerns. This letter stated, “… we continue to hear from constituents, academics, providers, and investors that there are specific provisions of the rulemaking that may cause market disruptions and limit the ability of segments of the market to reasonably access advice.  Join us in highlighting several areas where we believe the Department of Labor could further refine the rule to ensure it better serves the needs of retirement investors.”