Financial firms are pushing policy makers to scale back key
portions of a controversial Obama administration plan that would
impose new standards on brokers and insurance agents paid to give
retirement advice, according to industry officials.
Industry executives and their lobbyists have been canvassing
Capitol Hill in recent weeks to find allies to help them beat back
a proposal from the Labor Department that would require financial
advisers to always put a client's best interest ahead of their
personal gain.
House lawmakers are expected to ask Labor Secretary Thomas Perez
about the industry concerns during a hearing Wednesday.
"It's worthy of a great deal of investigation by Congress to see
what the impact of this is going to be on the customer," said
Kenneth Bentsen, president and chief executive officer of the
Securities Industry and Financial Markets Association, which has
pushed its own alternative that excludes certain elements of the
Labor plan.
A spokesman for the Labor Department said in written statement
that Wednesday's hearing "is another opportunity to get feedback on
how the department can craft a final rule that protects the best
interests of consumers and gives financial services professionals
flexibility in how they are compensated."
Fidelity Investments and other industry advocates said they
support the idea of a "best interest" standard. Yet industry
officials and their trade groups say the administration's proposal
will remove incentives for brokers to serve people with small
account balances and cut off small businesses' access to advice.
Some firms are drafting alternative legislation focusing on
improved disclosure and consumer education, according to lobbyists
for financial firms.
Some industry officials concede that President Barack Obama is
unlikely to sign into law any legislation restricting the Labor
plan. Lawrence Rybka, president of ValMark Securities Inc., an
insurance and securities brokerage based in Akron, Ohio, said a
recent lobbying trip he made to Washington, D.C., left him with the
view that blocking, or even altering, the proposal had "low
probabilities" of success. He is concerned the proposal would
create "a minefield around any advice."
In recent weeks, analysts have begun pushing companies to detail
the potential impact of the proposed rules as they predict a
decline in earnings as sales of high-fee, commission-based
retirement income products decline.
At a June 3 investor conference, MetLife Inc. Chief Executive
Steven Kandarian didn't quantify the effect on MetLife, the
nation's largest life insurer by assets, but instead provided an
analogy that hinted at the potential impact on the entire insurance
business.
Imagine, he said, a consumer going into a Chevrolet dealership
and looking at a SUV, "and the Chevy dealer says, 'In all honesty,
the guys across the street, the Ford dealership, they really have a
vehicle that fits you better than mine.'
"There is not going to be a lot of Chevy dealers, or at least
guys or women selling Chevys, anymore."
Write to Andrew Ackerman at andrew.ackerman@wsj.com and Leslie
Scism at leslie.scism@wsj.com
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