White House presses ahead with contentious financial adviser rule

The Obama administration is forging ahead with new regulations for financial advisers, defying critics who warn the rules would make it harder for low-income people to obtain investment advice.

“Inaction is not an acceptable option,” Jeffrey Zients, the director of the National Economic Council, said at a forum hosted by The Bipartisan Policy Center.

{mosads}President Obama is pushing Department of Labor (DOL) officials to implement new rules that would require financial advisers to disclose to their clients how they receive payments off the sales of financial advice.

The White House and its liberal allies argue the regulations will prevent financial advisers from turning a profit by selling faulty financial products to unsuspecting customers.

“Any adviser working in their clients best interest should support this rule,” Zients said.

Business groups, backed by Republicans and some moderate Democrats, say the rules are unnecessary, and warn they would have sweeping, unintended effects.

Ken Bentsen, president and CEO of the Securities Industry and Financial Markets (SIFMA), slammed Zients’s proposal as “unworkable.”

“Our members believe it’s unworkable as drafted,” Bentsen said during remarks at the forum. “We think it needs a lot of amending.”

Richard Ketchum, CEO of the Wall Street watchdog Financial Industry Regulatory Authority (FINRA), said at a separate event on Wednesday that DOL’s fiduciary proposal was “not the way to go.”

“[DOL’s plan] would leave enforcement entirely to investors who feel they’re wronged,” Ketchum told reporters, according to Reuters.

Pamela Everhart, Fidelity Investments senior vice president of government relations, said at the BPC event her company would accept a best interest standard.
 
“We say bring it on,” Everhart said. “These are life decisions … but the rule has to have structures in place so they can have access to the advice.”

Felicia Smith, senior counsel at the Financial Services Roundtable, argued there are already regulations are in place to protect consumers.

“I don’t think there is a problem on that large of a scale,” she said.

The DOL proposal is currently making its way through the comment period, and it’s unclear if it will be implemented by the end of the year.

Groups on both sides of the debate have been flocking to the White House to weigh in on the proposal, Office of Management and Budget records show.

A similar proposed rule failed to gain traction in 2010, but the White House is making a more public push this time around, with Obama touting the rule earlier this year at an event with Sen. Elizabeth Warren (D-Mass.).

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

— This story was updated at 2:02 p.m.