Ninety-six House Democrats have signed onto a letter calling for President Obama to make significant changes to his regulatory proposal for financial advisers, writing that they're concerned the current pitch would limit low- and middle-income Americans' access to financial advice.
The missive is a blow to the administration's efforts to rally support within their own party on a proposal that Obama tried and failed to implement in 2010 — and one that he's framed as an effort to rein in Wall Street.
And it's a sign that the business community and the financial advice industry has successfully convinced half of the Democratic caucus — as well as all Republicans — that Obama's current plan does more harm than good.
Rep. Gwen MooreGwen Sophia MooreWisconsin GOP quietly prepares Ron Johnson backup plans Pelosi picks Democrats for special panel tackling inequality Democrats offer bill to encourage hiring of groups hard-hit by pandemic MORE (D-Wis.) circulated the letter, which was first reported by The Hill, and nabbed signatures from different wings of the caucus, including House Democratic vice chairman Joseph Crowley (D-N.Y.).
"We continue to hear from constituents, academics, providers, and investors that there are specific provisions of the Rule that may cause market disruptions and limit the ability of segments of the market to reasonably access advice," according to the lawmakers' letter, sent to Labor Secretary Tom Perez.
Obama wants to implement a "fiduciary standard" that would increase disclosure requirements for financial advisers. He says it's needed to help consumers understand that their financial advisers might be earning a profit from Wall Street institutions by selling them financial advice packages.
But the industry argues that the proposal is not needed given the bevy of regulations that already exist. And they argue that the regulations would serve as a disincentive for financial advice firms to take on low-income clients, whose financial planning needs are less lucrative than wealthy Americans.
The large contingency of Democratic opposition on a financial services issue is rare, especially given that Obama and Sen. Elizabeth WarrenElizabeth WarrenBipartisan senators to hold hearing on 'toxic conservatorships' amid Britney Spears controversy Senate advances Biden consumer bureau pick after panel logjam White House faces increased cries from allies on Haitian migrants MORE (D-Mass.) announced the proposal in March at a high-profile event at AARP's D.C. headquarters.
Notably, House Minority leader Nancy Pelosi (D-Calif.), Democratic Whip Steny Hoyer (D-Md.) and House Financial Services Committee ranking member Maxine Waters (D-Calif.) did not sign the letter.
The Democratic dissent presents a hurdle for Perez, who now must weigh whether to significantly alter the proposal.
Appropriation bills in both the Senate and the House attempt to block the Labor Department from implementing the current proposal. And should Democrats get onboard with those measures, it will make it next to impossible for the administration to implement the regulation before Obama leaves office.