Hillary Clinton Takes Up Fiduciary Mantle for Financial Advice Industry

December 8, 2015

The president candidate directed Democrats in Congress to ‘do everything they can to stop’ Republican lawmakers from adding language to a government spending bill this week that would effectively dictate parameters of a pending DOL rule

Dec 7, 2015 @ 1:46 pm

By Liz Skinner

Democratic presidential front-runner Hillary Clinton leapt into the fiduciary fight Monday with a New York Times op-ed encouraging President Barack Obama and congressional Democrats to battle Republican efforts to undo a proposal to raise investment advice standards for retirement accounts.

“Hillary Clinton is making a very bold platform statement,” said Sheryl Garrett, founder of the Garrett Planning Network. “She is making a clear statement that not only is she going to uphold the intention of Dodd-Frank, she’s going to go even further.”

The former secretary of state directed Democrats in Congress to “do everything they can to stop” Republican lawmakers from adding language to a government spending bill this week that would effectively dictate parameters of a pending Labor Department rule. Such a measure would kill the plan the agency issued earlier this year, which would require advisers who work with 401(k)s and IRAs to act as fiduciaries, putting their client’s best interests ahead of their own.

“Right now, Republicans in Congress are working to attach damaging deregulation riders to the must-pass spending bill,” she wrote. “They want to roll back common-sense efforts to prevent conflicts of interest by financial managers.”

The government omnibus spending rule under discussion must be approved by Friday to keep the federal government operating and avoid a shutdown.

The DOL rules “are designed to protect hardworking families’ retirement savings,” Ms. Clinton said in a separate statement issued Monday.

Ms. Clinton made it clear that if she becomes the next president, she will take up the mantle of fiduciary standards for investment advice from Mr. Obama and pursue even stronger rules for financial firms.

“As president, I would not only veto any legislation that would weaken financial reform, but I would also fight for tough new rules, stronger enforcement and more accountability that go well beyond Dodd-Frank,” she wrote in the New York Times op-ed.

This is significant because another potential Republican rider to the spending bill would require the DOL to re-propose the regulation after they’ve made changes based on the extensive comment process that took place earlier this year. The concern among fiduciary proponents was that an additional re-proposal and comment period would cause the clock to run out on the rule because the Obama administration would not be able to finalize it before leaving office. If Ms. Clinton becomes the next president, that clock will be extended.

Ms. Clinton holds a 28% lead over the second-place Democrat in the presidential race, Sen. Bernie Sanders of Vermont, according to the latest CNN/ORC poll. Her support comes in at 58%, compared to 30% for Mr. Sanders.

But some believe Ms. Clinton’s statements in the New York Times are less about policy and more about politics, namely, reaching out to Democratic voters who support the more liberal wing of the party like Sen. Elizabeth Warren of Massachusetts and Mr. Sanders.

“She is trying to make sure the folks who follow Ms. Warren feel like someone is looking out for their interests,” said Paul Auslander, director of financial planning at ProVise Management Group. “If you just look at her record as a New York senator you know she’s not going to pass half of these things.”

Financial advisers, meanwhile, believe the term “fiduciary” is misunderstood by clients and by their own firms, a new survey of advisers concludes. About 80% of advisers surveyed consider themselves a fiduciary, but 83% of those individuals disagree at least in part with the statement: “Fiduciary oversight is applied consistently throughout my organization,” according to a survey of 202 advisers by CLS Investments and MarketCounsel.

Advisers aren’t the only ones confused by the functions of a fiduciary.

“Right now, the average investor believes that a broker, RIA, insurance agent and a bank teller all have to act in their best interest,” said Todd Clarke, chief executive of CLS Investments. “The average investor has no idea that a difference exists.”

Even if the DOL rule goes forth as planned, it still will require the financial industry to educate the public, he said.

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