Back in April of 2015, the US Department of Labor (DOL) proposed some new rules regarding the fiduciary responsibilities of investment consultants and other professional financial advisors. As it turns out, many of these investment hawks have been exempt from acting in their clients’ best interests while serving their own, which dates back to 1986. Overall, these rules have basically remained the same since 1975, and President Obama has worked side-by-side with the DOL to implement some much-needed changes: “Today, I’m calling on the Department of Labor to update the rules and requirements that retirement advisers put the best interests of their clients above their own financial interests. It’s a very simple principle: you want to give financial advice, you’ve got to put your clients’ interests first.”
Just a little over a year later, the GOP has expressed its dissent by backing a measure to overturn this ruling; the House of Representatives voted to strike down the DOL measure, and as usual, this party-aligned vote ended in favor of the GOP, 234-183. As a result, President Obama vehemently vetoed the bill. What this essentially means is that the proposal can now only pass in the Congress with a two-thirds majority vote, which is something the Republican Party falls well short of.
The president also had this to say when he issued the veto: “This rule is critical to protecting Americans’ hard-earned savings and preserving their retirement security. The outdated regulations in place before this rulemaking did not ensure that financial advisers act in their clients’ best interests when giving retirement investment advice. Instead, some firms have incentivized advisers to steer clients into products that have higher fees and lower returns—costing America’s families an estimated $17 billion a year.”
Prior to the latest Fiduciary Rule, a number of investment advisers who were not enrolled with the Securities and Exchanges Commission (SEC) were permitted to advise their clients without protecting their financial interests. The newer Fiduciary Rule requires all investment advisers to put their clients’ interests in front of their own profit margins.
A number of right-wing legislators are obviously at odds with the ruling; many concur that obtaining professional financial guidance is not affordable for millions of Americans who fall into the lower-to-mid range socioeconomic statuses.
Paul Kline (R), Minnesota, spoke out against Obama’s veto by saying, “Those who will be hurt the most are the very men and women who need help saving for retirement. President Obama is apparently willing to accept these painful consequences, but the Republicans are not.”
Phil Roe, a Republican legislator from Tennessee, also added some comments after the House struck down the Fiduciary Rule: “I don’t think anyone believes [the Fiduciary Rule] is going to make it easier for people to retire in this country. Life expectancies are going up, so we should be doing everything we can to help people save for retirement.”
On the flip side, the Democratic Party is obviously singing a different tune, claiming that the bill would add some transparency for Americans, especially when it comes to retirement savings. One Democratic Representative from Connecticut, Rosa Delauro, asserted that many financial advisers are on the take when they’re not obligated to some sort of reasonable fiduciary standards. She also said, “When it comes to retirement, every penny counts.”
Although the Republican base in the House of Representatives will likely strive to override the president’s veto, their chances for success may be extremely remote.