Obama launches financial adviser crackdown

President Obama moved ahead Monday with plans to impose contentious new regulations against financial advisers.

In a speech to the AARP, Obama said the rules are needed to better protect Americans from financial advisers who sell faulty advice in order to pocket commissions from big banks.

“You should have the peace of mind that the advice you’re getting is sound, that your investments are being protected,” Obama said in his remarks.

{mosads}The business community says that the new regulations — known as the “fiduciary rule” — would limit access to financial advice for low- and middle-income Americans because it would remove incentives for financial advisers to take on less-lucrative accounts.

The proposal is unlikely to take effect in the immediate weeks or months. Procedurally, he is only submitting his still undisclosed regulations for a review at the Office of Management and Budget. After that review — which could take months — it will be released for public comment.

Acknowledging the intense industry pressure against the rule in the past, Obama said there will continue to be significant lobbying as the newly proposed rule moves forward.

“There are a lot of financial advisers that support these basic safeguards … but there are also some special interests that will fight this with everything they’ve got,” he said.

But he argued that if a financial firm is truly acting on behalf of clients, there is nothing to worry about, adding that other countries have not seen the type of “industry doomsday predictions” of retirees losing financial advisers or spiking costs.

“If your business model rests on bilking hard-working Americans out of their retirement money, then you shouldn’t be in business,” he said.

Already, Obama is facing backlash on Capitol Hill.

Rep. Ann Wagner (R-Mo.) said in a public statement that she would reintroduce legislation later this week to combat the proposal.

 She said Obama is “doubling down on a misguided proposal that will negatively impact low- and middle-income Americans’ ability to save for their retirement.”



”This rule-making will only end up harming the very people that it aims to protect by limiting access for Americans who are seeking advice from their financial advisers on retirement decisions,” Wagner said in a statement.



She compared the proposal to Obama’s plan to eliminate 529 College Savings accounts, a tax benefit for higher-income Americans. Obama dropped the idea after it drew fire from both sides of the aisle.


Wagner said the fiduciary proposal “is more of the same in limiting options for families to save.”

But Obama’s plan has the support of some powerful groups, including the AARP and AFL-CIO.

Sen. Elizabeth Warren (D-Mass.) was on hand at AARP to help lend her support to the proposal.

Warren blasted the industry’s payment system, saying that many financial advisers earned free vacations and other incentives for selling faulty advice.

“It’s about time to do something that we should’ve done long ago — to end the kickbacks, the free vacations and the fancy cars … to ensure that all of our retirement advisers and not just some of them are looking out for the people they serve,” Warren said.

Warren said Obama’s new policy would “begin to fix a broken system” where it’s “perfectly legal to push a lousy product” to consumers who will be hit by a lack of retirement savings “like an oncoming freight train.”

The industry — backed by groups like the Chamber of Commerce — refutes the assertion that it is peddling financial advice for Wall Street, arguing that their entire industry is rooted in reputation and trust.

Sen. Cory Booker (D-N.J.), who spoke before Warren at AARP, praised Obama’s efforts and said it was a “bold step.”

House Minority Leader Nancy Pelosi (D-Calif.) in a public statement called the new regulations a “long overdue step” needed to strengthen the retirement system.

“By accepting backdoor payments from Wall Street firms and imposing hidden fees, these advisers offer bad counsel that can result in retirees losing more than a quarter of their retirement savings,” Pelosi said.