Today, the Ranking Member of the Financial Services Committee strongly defended the right of American workers and retirees to receive honest financial advice free of double dealing and conflicts of interests.
At the second in a series of congressional forums designed to address issues facing America’s middle class, Congresswoman Maxine Waters (D-CA) defended the Obama Administration’s forthcoming fiduciary duty rule, and pledged to oppose Republican efforts to undermine it.
The series of forums, known as the “Middle Class Prosperity Project,” was launched by United States Senator Elizabeth Warren (D-MA) and Rep. Elijah E. Cummings (D-MD), Ranking Member of the House Committee on Oversight and Government Reform.
She made the following statement.
“First, I would like to thank Senator Warren and Ranking Member Cummings for organizing this second hearing of their Middle Class Prosperity project. I was pleased to attend the first event they held last month, and I thank them for speaking out on an issue that doesn’t get nearly enough attention from the Republican majority in this Congress – the economic squeezing of America’s middle class.
Today, we meet to discuss one specific way that America’s middle class is being burdened: through conflicted retirement advice from financial advisers. That is, financial advice that benefits Wall Street firms with backdoor fees and hidden payments, rather than prioritizes the best interests of our nations’ workers and retirees.
Now, let me reiterate what my colleagues have already stated today – this issue is significant, and it represents real money being taken out of the wallets of workers and retirees. As a White House memo from earlier this year points out, conflicted investment advice costs savers over $17 billion dollars a year. That is, for every month that Wall Street firms can delay any action on this issue, they are able to profit $1.4 billion dollars at the expense of investors.
How does this exploitation of the middle class happen? Well, under outdated rules – rules that haven’t been updated in almost forty years – brokers are legally able to provide biased investment advice that steers retirees into products that benefit the brokers’ bottom-line over the retirees’ best interests.
I was pleased that President Obama last month made fixing this problem a top priority of his Administration. But it will take all of us - those of us in Congress, in the advocacy community, and in the general public – to stand up and protect the Department of Labor’s efforts to close this loophole.
In fact, in the Financial Services Committee, where I serve as Ranking Member, we are already seeing Wall Street and its army of lobbyists revving up to stop the Department of Labor before their rule has even been formally proposed.
Earlier this month, Republicans re-introduced a bill ironically named the “Retail Investor Protection Act.” What that bill would do is try to stall or stop the Department of Labor’s conflict of interest rule by saying they couldn’t move forward to protect retirement accounts like 401(k)s or IRAs until the SEC finalizes a separate rule under the securities laws.
What’s more, the bill would make the SEC jump over additional hurdles before they could act, requiring them to engage in additional, onerous “cost-benefit analysis.” And if that’s not enough, the cost-benefit analysis would require the SEC to factor in the lost commissions to brokers before they could move forward to protect investors. If that sounds illogical, it’s because it is. The fact that Wall Street firms may lose backdoor payments for providing investment advice that’s in their clients’ best interests should never be viewed as a “cost” of regulation. In fact, cracking down on such payments should just be considered good government!
With so much money at stake, this issue will continue to be a prime target for the Republican majority in this Congress. And I, for one, will work diligently to oppose efforts to undo progress on this issue. Today’s forum is an important first step in that effort, and I look forward to hearing the testimony of the panelists. Thank you, I yield back.”