BEYOND THE NUMBERS
In a letter to House and Senate Minority Leaders Nancy Pelosi and Harry Reid, CBPP Senior Fellow Jared Bernstein and New York University Law School Professor Lily Batchelder urge them to oppose efforts in ongoing budget negotiations to block a proposal designed to ensure that financial advisers always put their clients’ interests first. Here are some excerpts:
The proposed rule is an essential step forward in shoring up the retirement savings of millions of families. Specifically, it requires financial advisers to commit to put their customers’ best interest before their own profits — a so-called fiduciary standard — if the adviser is receiving compensation that creates a conflict of interest. This common sense approach would go a long way towards reversing the estimated $17 billion that families are losing each year as a result of conflicts of interest.
With such large losses for savers and 10,000 Americans turning 65 each day, the need for action is urgent. Nevertheless, some are pushing for the Department of Labor (DOL) to issue a new proposal and open yet another comment period of 15 days before finalizing the rule. We think this would be a grave mistake. . . .
We are all for public input, but let’s call a spade a spade: this is just a delaying tactic. If five years of input, over 300,000 public comments, 115 witnesses at public hearings, and significant substantive changes haven’t satisfied the rule’s opponents, isn’t it fair to say they will never be satisfied? . . .
The practical effect of requiring DOL to issue a new proposed rule and hold a new comment period is . . . to block them from finalizing the rule during this administration so that it can go into effect.
Millions of retirement savers would lose out in the process. According to careful, independent research, conflicts of interest can shave roughly one percentage point per year off of the returns to those saving for retirement. Over 35 years, that loss can shrink a nest egg by 25 percent.
The many investment advisers and brokers providing quality advice would lose out too. These advisers and brokers are already putting their clients’ best interest first by refusing conflicted payments or not responding to the perverse incentives they create. But it’s hard for them to compete on the basis of putting their clients’ best interest first when an astounding 75 percent of savers believe, incorrectly, that all financial advisers already have to act in their best interest.