By Kevin Cirilli - 02/23/15 06:00 AM EST
Joined by Sen. Elizabeth WarrenElizabeth WarrenOvernight Finance: Senate sends Puerto Rico bill to Obama | Treasury, lawmakers to meet on tax rules | Obama hits Trump on NAFTA | Fed approves most banks' capital plans The Trail 2016: When a pivot isn’t always a pivot Overnight Tech: Facebook's changes worry publishers | First stage of spectrum auction ends | Clinton recruits from Silicon Valley MORE (D-Mass.), President Obama will move ahead on Monday with plans to impose new regulations for financial advisers; the rules are vehemently opposed by the business community.
White House officials say the new regulations — dubbed "fiduciary rules" — are needed to protect consumers from financial advisers who have conflicts of interests. They say too many financial advisers earn commissions from big banks after selling faulty retirement advice to unsuspecting Americans.
The Chamber of Commerce and other business groups, backed by moderate Democrats and Republicans, argue that Obama's new regulations decrease low- and middle-income Americans' access to retirement advice. They say the regulations will mean advisers have less incentive to take on low- and middle-income Americans' retirement accounts, which are less lucrative than those of wealthier Americans.
This is Obama's second attempt at getting the new regulations, after failing in 2010.
Warren's involvement signals that progressives and outside liberal groups will fight hard for the new regulations.
While supportive, Warren has not been as outspoken on the issue as she has been in supporting other regulations.
But at a Senate hearing earlier this month, she alluded to the issue, which signaled to many in the industry that she would take a more vocal role.
"We need to do more to protect our seniors, but also particularly to make sure that financial advisers don't steer their clients into retirement products that maximize the advisers' profits while they drain away the clients' savings," Warren said at the hearing.
Labor Secretary Thomas Perez told reporters late Sunday that the new regulations will not nix all commissions, although the administration won't yet reveal the new regulatory proposal.
Obama directed his administration to submit it to the Office of Management and Budget (OMB) on Monday for a review. Once that review is completed, officials will publish the proposed rule and have a public comment period.
In a fact sheet on the new regulations, White House officials wrote, "Wall Street firms benefit from backdoor payments and hidden fees if they talk responsible Americans into buying bad retirement investments — with high costs and low returns — instead of recommending quality investments isn't fair."
"These conflicts of interest are costing middle class families and individuals billions of dollars every year," White House officials wrote in their fact sheet. "President Obama is taking a step to crack down on those Wall Street brokers who benefit from backdoor payments or hidden fees and don’t put the best interest of working and middle class families first."
Financial advisers bristle at how administration officials have framed the issue in saying that some in their industry peddle faulty advice for Wall Street.
Judy Miller, who advised former Democratic Senate Finance Committee Chairman Max Baucus (Mont.), criticized how the opposition has characterized the issue during remarks on Friday at the Chamber of Commerce.
"This sometimes gets set up as Wall Street versus the poor — that has nothing to do with it," said Miller, who opposes the new regulations, and is director of retirement policy at the American Society of Pension Professionals & Actuaries.
"We're talking about interactions between a small business and another business," Miller said. "The reputational risk for not being known as a good player is huge in this environment. Reputation is everything."
The industry has criticized Labor Department (DOL) officials for not coordinating with the Securities and Exchange Commission (SEC) in drafting their rules. Both agencies have jurisdiction over the financial advice industry.
On Friday, SEC Commissioner Daniel Gallagher, a Republican appointed by Obama in 2011, slammed DOL officials in a public speech in Washington for not coordinating with SEC officials.
Gallagher said the DOL “has not formally engaged the [SEC] commissioners" in the process.
He said that what little coordination did occur "has been nothing more than a 'check the box' exercise by the DOL designed to legitimize the runaway train that is their fiduciary rule-making."
Perez told reporters that he has done "extensive" outreach with various stakeholders. He said the DOL and SEC officials have separate jurisdictions on the issue.
Obama's new regulatory push is already facing heat on Capitol Hill. Rep. Ann Wagner (R-Mo.) has indicated that she will reintroduce legislation that would require more oversight in the rule-making process.
Sen. Ron Johnson (R-Wis.) also sent a letter to Perez earlier this month voicing concerns about the regulations.