http://thehill.com/policy/finance/230457-white-house-readies-crackdown-on-financial-advisersBy Kevin Cirilli - 01/22/15 04:47 PM EST
The White House is preparing to unveil new rules meant to tighten restrictions on financial advisers offering guidance on Americans' retirement savings accounts.
The pitch, outlined in a White House memo obtained first by The Hill, comes after the financial industry has worked for years to delay a rule being pushed by the Department of Labor that would change how investment advisers are paid.
For years, progressives have raised concerns that the same financial advisers and investment dealers who help Americans with their IRA and 401(k)s are also pocketing commissions while making sales that aren't in their clients best interests.
But the business community has vehemently refuted the allegations, arguing that the industry is rooted in trust and organized to allow for low-income Americans to get the same financial advice as the wealthy.
The administration, backed by Department of Labor Assistant Secretary Phyllis Borzi, insists on expanding "fiduciary duty" regulations for investment advisers who help people in the U.S. decide where to put their retirement savings.
Supporters, including the AARP and most progressive financial groups, argue that consumers aren't aware of the commissions their advisers earn when getting them to enroll in retirement plans that could be risky.
The business community has vehemently pushed back against such proposals, arguing that the regulations would end up hurting the same lower-income Americans that the administration wants to help.
That's because the regulations would change the payment model from a commission-based model to on one that relies more on a fee-based model, lowering the financial incentive for broker-dealers to take on lower-income accounts.
"This memo is cherry picked with facts," said one financial services industry insider who opposes the plan. "This is another sign that the president isn't working toward bipartisanship and wants to placate Sen. Elizabeth Warren and the Warren-wing of the Democratic Party."
According to a White House memo written earlier this month, senior administrators were briefed about "conflicts of interests" for broker-dealers who give financial advise.
The memo was authored by Council of Economic Advisers (CEA) chairman Jason Furman and CEA member Betsey Stevenson.
The 2010 Dodd-Frank Wall Street reform law requires the Securities and Exchange Commission (SEC) to investigate whether implementing a fiduciary standard for the industry would be in consumers' best interests.
But Borzi has pushed Labor Secretary Thomas Perez to issue its own regulations, arguing that DOL also has authority.
Republicans and centrist Democrats, spurred on by the business community, have raised concerns that the two agencies could ultimately decide on two different fiduciary standards, further muddying industry practices.
The House passed legislation in October 2013 requiring DOL to wait to issue its rules until after the SEC unveils its rule, which many in the industry expect would not negatively impact the payment system.
The legislation, introduced by Rep. Ann Wagner (R-Mo.) passed on a 254 to 166 vote, with 30 Democrats joining Republicans to pass the bill.
At the time of the vote, the industry had hoped for enough Democratic support to force the Senate to take up the legislation. The upper chamber, then controlled by Democrats, did not take up the bill.
A Wagner spokesperson could not immediately be reached for comment to see if she would reintroduce the legislation.
In March 2013, the Congressional Black Caucus sent a letter to DOL officials citing concerns that the rule changes would hurt minority communities.
But many of the same members — including Rep. Maxine Waters (D-Calif.), the top Democrat on the House Financial Services Committee — ended up voting against Wagner's legislation.
