WASHINGTON – The GOP-controlled House has voted along party lines to overturn new Obama administration rules requiring stricter standards for brokers regarding retirement investments.
Thursday’s 234-183 vote to reject the rules was driven by Republicans who warn they will limit the options available to investors and could cause brokers to abandon retirement savers with smaller accounts.
The new rules require brokers to act as so-called fiduciaries that put their clients’ best interests first, rather than steering them toward investments with higher fees for the broker. At stake are about $4.5 trillion in 401(k) accounts and more than $7 trillion in IRAs. Problems often occur when people who are retiring “roll over” their 401(k)s into individual retirement accounts and are sold questionable products.
“Some financial advisers are recommending financial instruments that offer financial rewards to the adviser for steering clients to those instruments, instead of recommending retirement options that are in the best interest of the customer,” said Rep. Rosa DeLauro, D-Conn.
The White House has promised to defend the rules with a threat to veto Thursday’s measure.
Opponents of the rules counter that the new fee structure might not be worth the broker’s trouble. Instead, opponents say, retirees may have to seek higher-priced advice.
“The last thing Washington should be doing is making it harder for working families to save and invest, but because they took their ‘my-way-or-the-highway’ approach, we now have a rule that will do exactly that,” said Rep. Phil Roe, R-Tenn. “This ‘fiduciary’ rule will make it harder for working families to save for retirement. It will restrict access to some of the most basic financial advice.”
Rep. Charles Boustany, R-La., said the rule will “make it so costly to use a retirement adviser, most low- and medium-income families will be locked out.”
Democrats countered that the previous rules allowed brokers to rip off investors by pushing them toward higher-cost investments like variable annuities or riskier options such as real estate investment trusts.
And they said that Labor Secretary Tom Perez has been accommodating to concerns raised by interest groups and has made numerous modifications in response. As a result, Democrats who opposed prior versions support the final rule, and they said the financial services industry can more easily adapt to it.
“I don’t know why you would ever bet against innovation in the United States of America, but that seems to be what our Republican colleagues are doing when they’re saying, ‘the industry won’t respond to this rule,'” said Rep. John Delaney, D-Md.
In a statement, the White House says the new rules “will ensure that American workers and retirees receive retirement advice in their best interest, better enabling them to protect and grow their savings.
“The final rule reflects extensive feedback from industry, advocates, and Members of Congress, and has been streamlined to reduce the compliance burden and ensure continued access to advice,” the statement said.
The measure now heads to the Senate under a special procedure that would not allow Democrats to filibuster it. President Barack Obama’s veto makes it virtually certain that the rules will go forward.
“This is, frankly, a waste of time today,” Perez said.