Liberal gadfly and presidential hopeful Senator Elizabeth Warren, D-Mass., wrote to Labor Secretary Eugene Scalia Wednesday in the run-up to the department’s reintroduction of its Conflict of Interest Rule (colloquially known as the fiduciary rule).
In the letter, Warren warned Scalia against proposing weak conflict-of-interest standards “that would allow financial advisers to put their own interests above the interests of working families saving for retirement.”
This month, the DOL is expected to propose a replacement for the Fiduciary Rule, which the Fifth Circuit vacated last year. The Trump Administration refused to appeal that ruling.
“Americans’ savings should never be willfully compromised by conflicted actors operating under anemic rules—but they are,” Warren wrote.
“Given your past statements that the fiduciary rule ‘is a matter that ought to be addressed by the SEC,’ I am concerned that the DOL may simply copy the wholly inadequate standards of conduct framework developed by the SEC in its recently-finalized Regulation Best Interest,” Warren added.
That would be a costly mistake, she said, “those standards not only allow broker-dealers to give clients advice that is not in their best interest, but significantly water down the longstanding fiduciary standard that has protected the clients of the investment advisers for decades.”
Conflict of interest cost
Warren claimed, “studies show that American families lose billions of dollars in retirement savings every year as a result of financial advisers who prioritize making a quick buck over helping customers trying to build a secure retirement for themselves and their families.”
In 2016, DOL updated its Fiduciary Rule to protect investors, “and during the short period the fiduciary rule was partially implemented, investors saw positive results: firms eliminated their highest-fee products and cut prices on funds; some firms eliminated commission-based sales practices entirely.”
Despite its positive impact for American families, that rule was overturned by a lawsuit brought by Scalia while he was in private practice and representing the Chamber of Commerce, the broker-dealer industry, and other business interests.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
