“The Department of Labor welcomed feedback on how to address conflicts of interest in retirement advice through meetings, hearings, phone calls and written comments from a broad range of stakeholders, including consumer and retirement advocates, representatives from the financial services industry, and others,” he said.
AARP (formerly known as the American Association of Retired Persons) carries great weight in Washington because of its massive war chest and membership, a group of 38 million people over the age of 50 who tend to vote in great numbers. Non-partisan and non-profit, it has made financial issues a top priority and had been working in some capacity on getting the broker rule enacted since the late 1990s.
Cristina Martin Firvida, the group’s director of financial security, said that while AARP was able to provide something of a counterweight to the finance industry’s opposition, it still sees the fight more in David v. Goliath terms.
“Certainly our 38 million members are very, very important,” she said. “But there is no mistaking that the power of the lobbying on the other side of this issue is staggering.”
Calculated Move
The Labor Department records, which cover the first six months in 2015 when the push to revive the rule kicked into high gear, provide a rare glimpse into how the Obama administration courts, and relies on, outside allies in tough policy fights.
Opponents included big banks like Morgan Stanley, major mutual fund companies like Fidelity Investments and independent brokers across the U.S. Many see the Labor-AARP partnership as a calculated move by the government to use the retirees’ group as its own de facto lobbyist. With the administration unable to persuade scores of congressional Democrats to support the rule, they say, it turned to AARP.
The result, the industry says, is that a rulemaking impacting millions of investors and $12 trillion in retirement savings was marred by politics. The message of beating back Wall Street, they add, quickly took precedence over a deliberative process that could have led to a less-flawed regulation. In particular, they say the policy could lead to lower-income clients being shunted aside because of the increased compliance costs.
“It is one thing to win a political race, it is another thing to make good policy,” said Kenneth Bentsen, president of the Securities Industry and Financial Markets Association which represents hundreds of brokerage firms, banks and asset managers. “In this instance, the politics don’t make it right.”
‘Sea Change’