The White House altered a report to justify a new Obama administration rule regulating investment advisers, according to a major lobbying organization for the securities industry.
The White House Council on Economic Advisers issued a recent report alleging that consumers spend an unnecessary $17 billion on counsel from retirement investment advisers because there are no rules in place to guard against hidden fees. The White House is trying to roll out a new regulation through the Department of Labor to correct that perceived problem. (RELATED: Financial Advisers Fear New Obama Regulations).
But the Securities Industry and Financial Markets Association (SIFMA) said that the new rule would actually create higher costs for consumers by forcing retirees to switch from paying their advisers on a case-by-case basis to arrangements that would pay them in regular intervals.
As for the White House report?
“We dug into the cited research [in the report] and we found that the report took liberties with what the cited research actually said,” SIFMA CEO Kenneth Bentsen told The Daily Caller.
The $17 billion figure did not come from any of the cited research, Bentsen said. And a bit about annuities, supposedly based on cited research, was never in the research at all. How did the White House come up with the $17 billion figure?
“It wasn’t clear what kind of methodology the CEA used to come up with its dollar amounts,” Bentsen said, noting that the White House used what appears to be a “simplistic and probably incorrect method to assert the dollar value of $17 billion. It was rudimentary at best. This is not a cost-benefit analysis. This is trying to build a political case — ignoring empirical data.”
SIFMA commissioned its own counter-report, provided to TheDC, contesting the White House’s claims.
“The White House Report posits that US investors, in the aggregate, bear large costs because of the services provided by brokers who act in their own best interests, rather than the investors,'” the SIFMA report said. “While the Report points to academic literature to support these aggregate cost estimates…are not directly found in the academic literature. This approach is flawed in multiple ways.”