The U.S. Senate is expected to soon vote on a resolution under the Congressional Review Act to block the Department of Labor’s (DOL) recently released fiduciary rule. The resolution, sponsored by Senator Johnny Isakson (R-Ga.) already passed the House of Representatives by a vote of 234-183. Now, the Senate should follow suit in approving this resolution and blocking the rule that has been compared to Obamacare for your retirement savings.
Under the thousand page rule, expert investment advisors will have to prove they are acting in the “best interest” of their client. While this sounds reasonable, economists warn the standard is “a vague open-ended obligation with seemingly no bounds.”
As a result, the regulatory costs of complying with the rule will likely be immense for business. While large investment firms will have the economies of scale to continue, smaller advisors will not. The impact of increased compliance costs will disproportionately fall on low and middle income families who may lose their broker of choice or be priced out of the market entirely.
In turn, this will directly impact the ability of American families to utilize savings accounts. It is estimated that the rule will result in 7 million IRA holders being priced out of investment advice and between 300,000 and 400,000 fewer IRAs will be opened every year as a result of the rule. All told, this regulation could mean more than $80 billion in lost savings.
Although supporters of the rule claim it is necessary to ensure savers receive the best possible advice, the final product is so complex and burdensome that millions will inevitably be locked out from receiving the guidance they need. Through this regulation, the federal government is essentially moving to exert close control over the retirement saving decisions of Americans across the country.
Clearly, the fiduciary rule will make saving for retirement worse, not better. Senators should vote for this resolution and show their commitment to protecting the ability of millions of American families and savers to seek sound financial advice toward their retirement savings.