Congress Should Kill Scheme To Force Feed Americans Financial Advice

Whitt Flora Contributor
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Congress should kill a plan that would hurt American wage earners by restricting their choices for retirement investment advice.

The proposal from the Department of Labor (DoL) would give those wage earners only two choices for that advice: hire investment advisers who offer fee-based advice and services, which is generally expensive, or rely on the so-called “robo-advice” available on the Internet, thus making millions of Americans dependent on that advice. If this robo-advice is anything like the help found on the disastrous Obamacare signup Web site, we know where that would lead.

To prevent a government shutdown, the House and Senate must pass a spending bill by December 11, when the current legislation expires. The proposed DoL regulation should be killed as part of that effort.

The regulation would redefine the term “fiduciary” under the Employee Retirement Income Security Act of 1974, which sounds harmless and simple enough. However, as we all know, Washington doesn’t do simple. The proposed regulation is 102 pages of complex legalese, but simply put, stock brokers or insurance agents who work on commission would be severely hampered in their ability to provide investment advice because their advice automatically would be considered “conflicted.” In practice, the regulation would restrict the public’s retirement investment choices for 401(k) and and IRA retirement plans.

What is most galling about the proposal, which has prompted bipartisan opposition on Capitol  Hill, is the people the regulation would harm the most are the middle- and lower- income wage earners the administration claims to champion.

Sen. [crscore]Johnny Isakson[/crscore] (R-Ga.) has described the proposal as “a solution in search of a problem.” A coalition of leading free-market organizations opposing the regulation describes it as “Obamacare for your IRA.” That coalition includes Americans for Prosperity, Americans for Tax Reform, the Competitive Enterprise Institute, Freedom Works, and the National Taxpayers Union.

However you describe it, here is what you need to know about the proposed rule:

First, it is a perfect example of government paternalism trumping personal responsibility; it presumes the federal government is a better steward of your financial future than you are. Remember, the government has done such a wonderful job with its own fiscal responsibilities – just look at Social Security, the budget deficit and the national debt.

Second, knowing how Washington operates this could be just the beginning. Why stop at life insurance sales and financial advisers? To be consistent, shouldn’t everyone selling a product or service be required to act only in your best interest: realtors, car dealers, appliance stores and everyone else?

Third, although supporters of the rule claim it would help those saving for retirement, in fact it would do the opposite. DoL argues that Americans can’t prudently manage retirement assets on their own. Then DoL proposes regulations that would force many Americans to do just that: manage their investments by relying solely on computer-generated robo-advice because professional advice would vanish from the marketplace for those who can’t afford it. With this action, DoL doesn’t even attempt to hide its contempt for the intelligence of the American people.

Finally, this is an attack on the free enterprise system. For all practical purposes, the proposed rule would make it impossible for life insurance companies to sell their own products, destroying thousands of jobs in the industry. In no other part of the economy is it deemed improper for a company’s representatives to sell their own products and services because Washington considers them to be “conflicted.”

The DoL proposal is terrible idea, both in practical terms and philosophically, and it shouldn’t be allowed to go into effect.

Whitt Flora, an independent journalist, is a former chief congressional correspondent for Aviation & Space Technology magazine and a former White House correspondent for the Columbus Dispatch in Ohio.  Readers may write him at 319 Shagbark Road, Middle River, MD 21220-3903.