Another letter from Democrats is circulating Capitol Hill, detailing what it says are a “sample of some of the concerns” lawmakers have with the Department of Labor’s proposed fiduciary rule.

Rep. Gwen Moore, D-Wisconsin, is directing the effort, according to one Congressional staffer.

Moore, a fifth-term Congresswoman, is a member of the House Financial Services Committee and the Congressional Black Caucus.

She was one of 30 Democrats in the House to vote for the Retail Investor Protection Act in 2013, which Rep. Ann Wagner, R-Missouri, is planning to reintroduce in the coming weeks. It would require the Securities and Exchange Commission to be the lead regulator in writing a new fiduciary standard for the financial services industry.

So far, the letter has eight other signatories, all Democrats. It urges the DOL to take a “balanced approach” in both protecting consumer interests while not restricting access to retirement advice.

Opponents of the rule argue that several proposed provisions would end up restricting lower and middle-income savers’ access to advice.

Specifically, its Best Interest Contract Exemption, which would require extensive contractual disclosures of fees on any investment product sold for a commission, would be costly to implement, and expose advisors to too much liability. That would encourage all advisors to move to a fee-based model of compensation, which opponents say would not be best for lower income savers.

Read our DOL fiduciary rule coverage here

The most recent letter from Democrats raises similar concerns with the BIC exemption, saying it creates “practical problems for providers to implement.”

The letter calls for the DOL to take less of a “prescriptive” approach, and instead craft a principal-based provision.

A simplified exemption would not require a client’s signature prior to any conversation on investments, and would harmonize standards for providing proprietary products with those laid out in section 913 of the Dodd-Frank Wall Street Reform Act.

Once simplified, the BIC exemption should also be allowed for advisors to small businesses. The “sellers exemption” in the proposed rule would automatically make anyone advising a plan with fewer than 100 participants a fiduciary.

The letter also calls for more flexibility in the education carve out by allowing advisors to offer asset allocation examples.

And lawmakers want assurance that a new rule won’t restrict lifetime income products. Critics of the proposal say it would limit access to annuities at time when other government agencies are trying to encourage their wider adoption.

The Democrats are also calling for a safe harbor for “good faith implementation.”

“We believe this would provide an opportunity for small businesses and financial advisors to comply with the rule without the threat of lawsuits,” says the letter, which seems to offer credence to critics of the proposal that say it would create a raft of costly litigation.

“It is vital that the proposal doesn't limit consumer choice and access to advice, have a disproportionate impact on lower- or middle-income communities, or raise the costs of saving for retirement,” says the letter, echoing the primary argument the rule’s most ardent opponents have been making for years.

Instant Insights /

More Democrats raise issues with DOL fiduciary rule

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