A well-mannered, at times jocular subcommittee hearing on theDepartment of Labor’s conflict of interestproposal in the Senate turned in tone when Sen.Elizabeth Warren, D-Massachusetts, took to questioning panelwitnesses.

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One in particular, Peter Schneider, president ofPrimerica Inc., a Georgia-basedprovider of investment services distributed through a channel of90,000 advisors, was specifically signaled out by Sen. Warren, astaunch supporter of the DOL’s rule.

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In the testimony he gave to the Health, Education, Labor andPensions subcommittee, Schneider testified that the DOL’s currentproposal is more “punishing” than the first one withdrawn in2011.

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Schneider’s testimony was representative of the opposition tothe DOL’s rule that believes the Best Interest Contract Exemptionwill ultimately force the advisory industry to a fee-only model ofcompensation. That in turn will disincentivize providers fromserving the low and middle-account market, say opponents to therule.

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Primerica will pay $1.2 billion in death benefits tobeneficiaries this year alone, said Schneider, and the firm hashelped savers put away $50 billion for retirement. Most of which isin small accounts, he said.

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The average household income of a Primerica account holder isbetween $30,000 and $100,000 a year, precisely the type ofretirement investors that will be denied access to advice if theproposed rule is enacted, according to the DOL’s opponents.

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“Inadequate retirement savings is the overriding issue facingthe middle class,” said Schneider. “This rule is anotherobstacle.”

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In her time, Warren made an opening salvo--“it is now perfectlylegal for retirement advisors to give advice that boosts their ownincomes by selling lousy products to clients”—before turning toSchneider.

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Warren brought attention to a string of lawsuits brought bycivil servants in Florida that accused Primerica advisors ofrecommending they cash out their state pensions in order to openaccounts with Primerica.

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“At least 238 firefighters and teachers and other career publicworkers near retirement age accused your company of providing badadvice that drained their retirement savings,” said Warren, citingan unnamed news source.

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“Primerica was poised to make a lot of money,” continued Warren,“but only if you could convince Florida firefighters who were nearretirement to cash out their guaranteed pensions.”

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Warren then asked Schneider point blank if he believed that wasgood advice.

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“It doesn’t have any application to the rule before thecommittee,” answered Schneider, before Warren interrupted him thefirst of several times.

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“Once these workers retired and moved out of their governmentplans Primerica agents stood to profit,” stated Warren.

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“My question is not how you were paid, it is whether you thinkit is sound investment advice to encourage public employees to movetheir money out of their pension and into riskier assets with noguarantees just before they retire,” she asked, in a tonereminiscent of a trial attorney’s on cross examination.

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“Regulators found the firm had acted properly,” counteredSchneider.

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“I’m going to stop you right there,” said Warren. “The questionabout the regulators is the question about is it legal to do that,and that is exactly the problem we’ve got. It is legal to do that,”she stated.

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When Warren again asked about the wisdom of cashing outguaranteed pensions just before retirement, Schneider explainedthat in some instances, it might be sound advice. He provided theexample of a gravely ill pension participant, who in Florida isprohibited from passing pension assets on to heirs.

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“I’m sorry. Are you suggesting these 238 people were weeks awayfrom dying and that’s why they all got that advice,” asked anincredulous Warren.

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“Senator, the courts dismissed those cases,” arguedSchneider.

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“Because it is legal activity. I think we’ve established thatMr. Schneider, that no one broke the law. The question is whetherthe law should be changed,” challenged Warren.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.