Wall Street is wooing black lawmakers as part of their effort to block a controversial rule championed by President Obama that would change the way financial advisers operate.
Groups led by the Securities Industry and Financial Markets Association (SIFMA) want to block the rule, arguing it would hurt lower and middle class consumers by raising costs and requiring even simple advice to be accompanied by heavy paperwork.
{mosads}In private meetings and in ads that have blanketed cable television over the last month, they argue the days of getting simple financial advice over the phone would end, and that constituents of black lawmakers could be disproportionately affected.
Some members of the Congressional Black Caucus (CBC) have been receptive to arguments about the rule, which has divided Democrats.
“Rich people are always going to get advice,” one aide to a CBC member concerned by the rule said. “But it’s the poor people — many of which are our constituents — who we’re concerned about.”
Supporters of the rule argue that imposing a new “fiduciary standard” on financial advisers would better protect consumers.
It would protect people from advisers who win commissions from Wall Street banks after selling products to unsuspecting consumers by requiring the advisers to offer specifics on what they have to gain.
Rep. Maxine Waters (D-Calif.), a CBC member supportive of the rule, said it would require “persons providing retirement advice to put the interests of their customers ahead of their own.”
CBC members are seen as pivotal players in the debate.
“CBC members are going to play a huge, crucial role in this debate,” said Jill Hoffman, a vice president of government affairs at the Financial Services Roundtable, which is critical of the rule. She said that “their support or opposition to the rule will directly influence the regulation’s chances of implementation.”
The Black Chamber of Commerce has come out against the rule and the group’s president Harry Alford said that his organization will press CBC members to oppose it.
“The notion that opposing this rule means you’re on the side of Wall Street is a lie,” Alford said. “Poor people don’t have access to the big financial advisers. They’re getting advice from the local guy at their church. And it’s those small advisers — those are the ones who are going to get knocked out. That’s not fair.”
Opponents hope to block the rule by adding language to a government-spending measure that would prevent it from going into effect for the next year.
Black lawmakers have been split over the rule.
While Waters, the ranking Democrat on the House Financial Services Committee is backing Obama, 28 CBC members criticized the administration’s efforts in a letter to Department of Labor officials in 2013.
They faced an immediate backlash from progressive circles, according to the senior aide to a CBC member.
The aide said that Warren’s involvement combined with the backlash from the last letter has made it “extremely unlikely” that they’ll use a similar strategy this go-around. The aide said that CBC members are observing the “shouting match” occurring between Warren-wing Democrats and the business community.
“Look, in theory we’re supportive of the goal of protecting consumers,” the aide said. “But in practice? The rule as it is now is fairly hard for financial advisers to meet in real life. And that would raise costs.”
CBC Reps. David Scott (D-Ga.) and Lacy Clay (D-Mo.) signed onto a bipartisan letter in July calling on Obama to issue a re-proposal of the rule. CBC Reps. Gwen Moore (D-Wis.) and Frederica Wilson (D-Fla.) are also seen as having concerns with the rule, according to multiple sources.
CBC Reps. Bobby Scott (D-Va.) and Waters have spoken out in favor of the regulation, as has Sen. Cory Booker (D-N.J.), the only CBC member in the Senate.
A business lobbyist said that Labor Secretary Thomas Perez has met personally with CBC members in an effort to appease their concerns.
The business community has publicly sought to argue that the higher costs would force low-income Americans — those in need of financial advice the most — into receiving automated advice from digital applications as opposed to person-to-person advice.
Booker joined Warren and Obama in February at the Washington headquarters of AARP, which is supportive of the proposal, to announce the plan.
“People who have worked hard and played by the rules should be able to retire with security,” Booker said at the event.