Senate Homeland Security and Governmental Affairs Committee Chairman Ron Johnson (R-Wis.) is pressing administration officials on how they’ll impose looming regulations for financial advisers that Republicans say will cut access to low-income Americans.
Johnson is asking Department of Labor Secretary Thomas Perez to explain how the new regulations won’t “adversely affect middle and low-income Americans,” according to the Feb. 5 letter obtained first by The Hill on Monday.
{mosads}Republicans and centrist Democrats, backed by the business community, are fighting back against Obama official’s plans to propose new regulations against financial advisers and investment dealers charged with helping Americans with their Individual Retirement Accounts and 401(k)s.
Administration officials want more stringent disclosures requirements — known as the “fiduciary rule” — for the industry about their commissions, arguing that it’ll cut back on bad actors selling faulty financial plans while pocketing commissions off unsuspecting Americans.
But critics argue that the regulations, which failed to gain traction in 2010, would change the industry’s payment model so radically that financial advisers would no longer have a financial incentive to serve low- and middle-income Americans’ accounts, which are less lucrative than big businesses.
As a result, low- and middle-income Americans would lose out on financial advice, they argue.
Johnson asked Perez to explain its role in drafting a senior White House memo co-authored by Council of Economic Advisers Chairman Jason Furman last month that championed the new regulations. The industry heavily criticized the memo with presenting a one-side argument in favor of new regulations.
Johnson is asking for a response by Feb. 19.
Last week, Sen. Elizabeth Warren (D-Mass.) alluded to the issue at a Senate Special Committee on Aging hearing, signaling that she would support the administration.
“We need to do more to protect our seniors, but also particularly to make sure that financial advisers don’t steer their clients into retirement products that maximize the advisers’ profits while they drain away the clients’ savings,” Warren said at the hearing.