Obama Wants to Make Sure Your Broker Can't Take Advantage of You. Which Dems Disagree?

On Monday, at an AARP event, President Obama, with Senator Elizabeth Warren at his side, announced a new Department of Labor proposal to impose a fiduciary duty on financial advisers. In other words, your financial adviser would have to act in your best interest, not his or her own.

Here's what the White House said about the new proposed rule in its fact sheet:

A system where Wall Street firms benefit from backdoor payments and hidden fees if they talk responsible Americans into buying bad retirement investments—with high costs and low returns—instead of recommending quality investments isn’t fair. These conflicts of interest are costing middle class families and individuals billions of dollars every year. On average, they result in annual losses of 1 percentage point for affected investors. To demonstrate how small differences can add up: A 1 percentage point lower return could reduce your savings by more than a quarter over 35 years. In other words, instead of a $10,000 retirement investment growing to more than $38,000 over that period after adjusting for inflation, it would be just over $27,500. ....
Because of outdated rules protecting retirement savings, we’re seeing similar types of bad incentives and bad advice lead to billions of dollars of losses for American families saving for retirement every year—with some families losing tens of thousands of dollars of their retirement savings. That’s why today, the President directed the Department of Labor to move forward with a proposed rulemaking to protect families from bad retirement advice by requiring retirement advisers to abide by a “fiduciary” standard—putting their clients’ best interest before their own profits.

That seems like common sense, right? Well, not to the industry lobbyists and members of Congress who have been fighting this pending rule for years because they think that financial advisers should be able to take advantage of you.

On October 29, 2013, the House passed the so-called Retail Investor Protection Act. This bill was designed to delay this Department of Labor rule until the SEC--more in the pocket of Wall Street--finalized its rule.

Here is some excellent background information by David Dayen that I included when I wrote about the bill then:

The Labor Department proposal, known as the “fiduciary rule,” would change the ethical standards by which employer-based retirement products like 401(k)’s and IRAs are marketed and sold. The rule has not been updated since 1975, before 401(k)’s and IRAs even existed. The Labor Department wants to broaden the definition of a “fiduciary” to cover all financial advisers who offer individual investment advice for a fee. Under the rule, they would be legally required to work in the best interest of their clients. For example, a fiduciary would not be able to push investment products on customers in which they have a financial stake. The agency defines the goal of the proposal as “to ensure that potential conflicts of interest among advisers are not allowed to compromise the quality of investment advice that millions of American workers rely on, so they can retire with the dignity that they have worked hard to achieve.” ...
Currently, it is depressingly common for financial advisers, more than 80 percent of whom are not fiduciaries, to self-deal when offering advice. First off, they obtain large fees from the retirement products they sell. According to the think tank Demos, a median-income, two-earner household will pay $155,000 during their lifetime to financial advisers on average. (The lifetime gains for two-earner households from retirement accounts are around $230,000, meaning that nearly two-thirds of the profits go to the industry.) Second, non-fiduciary financial advisers can enjoy kickbacks; right now there is no rule against an adviser from a mutual fund company encouraging clients to put their money in specific funds sold by that company. In fact, that’s the norm, and the adviser typically receives a commission for the sale.

Conflicts of interest like this cost retirement investors at least $1 billion a month, because the funds they get channeled into underperform the alternatives. Financial advisers also encourage rollovers into high-cost IRAs when an individual changes jobs. None of these schemes have to be disclosed to the customer, under the current standard. The National Bureau for Economic Research found in a recent study that “adviser self‐interest plays an important role in generating advice that is not in the best interest of the clients.”

So in the middle of a retirement crisis, when the majority of Americans already aren’t accumulating the savings they need to maintain their standard of living, sellers of retirement products are skimming close to $60 billion a year off the top through deceptive practices, making a bad situation even worse.

30 Democrats joined the GOP in voting for it. This was less than what supporters had expected, but was still far too high.

Which Democrats voted to allow your financial adviser to take advantage of you?

Of the 30 House Democrats who voted for it, seven are no longer in Congress:

John Barrow (GA-12)
Pete Gallego (TX-23)
Dan Maffei (NY-24)
Jim Matheson (UT-04)
Mike McIntyre (NC-07)
Bill Owens (NY-21)
Bradley Schneider (IL-10)

And an eighth has moved up to the Senate: Gary Peters (D-MI).

But 22 are still in the House:

John Carney (DE-AL)
Gerry Connolly (VA-11)
Jim Costa (CA-16)
Henry Cuellar (TX-28)
John Delaney (MD-06)
Ted Deutch (FL-21)
Bill Foster (IL-11)
Joe Garcia (FL-26)
Denny Heck (WA-10)
Jim Himes (CT-04)
Derek Kilmer (WA-06)
Ron Kind (WI-03)
Rick Larsen (WA-02)
Gwen Moore (WI-04)
Patrick Murphy (FL-18)
Ed Perlmuter (CO-07)
Scott Peters (CA-52)
Collin Peterson (MN-07)
Kurt Schrader (OR-05)
Brad Sherman (CA-30)
Kyrsten Sinema (AZ-09)
Filemon Vela (TX-34)