The Financial Planning Coalition has sent a letter to all members of Congress strongly urging them to reject any legislative proposal that would block the Department of Labor’s effort to finalize and implement a new fiduciary rule.

The Financial Planning Coalition advocates for the comprehensive application of fiduciary standards for financial advisors.

Its letter alludes to an outline of legislation drafted in early November by two Democrats and two Republicans in the House of Representatives that would serve to replace the extensive fiduciary regulation the DOL has promised to finalize by the end of the Obama administration.

The legislation from the four Congressional members is based on seven principles. One says all “public policies must protect access to investment advice and education for low and middle-income workers and retirees.”

Critics of the DOL’s rule argue its extensive disclosure and prohibited transaction requirements will make low-value accounts too expensive to administer for IRA and plan providers.

Consequently, low and middle-income Americans with small retirement accounts will struggle to get access to retirement advice, say the critics.

A recent report from analysts at Morningstar estimated up to $600 billion of low-value IRA accounts would be let go by full-service wealth management firms if the DOL’s rule is finalized as proposed.

A portion of those accounts would likely find a home in passively managed investments offered by robo-advisors, which stand to benefit from the rule, Morningstar’s report said.

The “declaration of principles” that the four Congressional members plan to use to craft replacement legislation to the DOL rule do not go nearly far enough to ensure Americans are protected from conflicts of interest in the financial advice they get, says the Financial Planning Coalition.

“These principles refer only to disclosure of conflicts of interest; but are completely silent on a fundamental component of the fiduciary standard-- an obligation to mitigate compensation practices and incentives that give rise to conflicts of interest,” says the Financial Planning Coalition’s letter to Congress.

The Coalition also warns against the tactic of attaching an appropriations rider to the omnibus funding bill, which will direct exactly how money in the bi-partisan budget bill that was recently signed into law will be spent.

The omnibus bill is needed by December 11 in order to avoid a government shutdown.

Supporters of the DOL’s fiduciary rule have long considered an appropriations rider the primary arrow in the quiver of opponents to the rule.

See all BenefitsPro coverage on the Department of Labor proposed fiduciary rule

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Fiduciary advocates warn Congress against thwarting DOL

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