Retail Investor Protection Act

Floor Speech

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Mr. LYNCH. Mr. Speaker, I rise in support of my amendment to H.R.
1090, the so-called Retail Investor Protection Act.

Mr. Speaker, if adopted, my amendment would allow the Department of
Labor to complete and adopt a rule to require that investment advisers
act solely in the best interest of the workers and retirees who rely
upon them in making financial decisions regarding their retirement.

I bet most Americans think that financial advisers are already
required to act in the retirees' best interest. Unfortunately, the bad
news is that that is not the state of the law today. The good news,
however, is that, hopefully, if we can defeat H.R. 1090--and the
President has promised to veto this bill--that situation may be about
to change.

At the outset, it is important to remember that this issue concerns
the retirement security of all Americans. It is important that we get
this right.

Congress, in its wisdom--obviously, this was a previous Congress--
gave the DOL exclusive jurisdiction regarding retirement plans under
the Employee Retirement Income Security Act of 1974. In doing so,
Congress recognized that retirement is different.

Previous Congresses realized the importance of protecting workers and
retirees by imposing a higher standard of care and loyalty upon
financial advisers who offer services and sell stocks or bonds or other
assets to be included in retirement plans. Again, that is because
retirement is different.

The basic idea of retirement plans works like this: if the average
worker sets aside a small amount of wages regularly over 30 or 35 years
that they are in the workforce and that amount is invested prudently
and allowed to grow, then through proper investment and the miracle of
compound interest, that worker will likely have a sizable nest egg upon
which they can rely in retirement.

Investing for retirement is also different in another context. It has
grave consequences if it is done improperly or neglected. There is no
second chance if you are at the end of your working life. You can't go
back. This is your nest egg. It is tough to go out and get another job
when you are at the age of retirement. You are out of time. So workers
have a lot at stake.

There are huge risks for workers if their retirement contributions
over 30 years are not invested in a way that is in their best interest.
They should be able to rely on the fact that their sacrifice, that
their savings have been invested in a way that is in their best
interest, not in the best interest of the financial adviser or the
investment company. Again, however, that is not the case of the law
today.

Right now, most--but not all--financial advisers are often paid extra
money, extra fees, a higher commission to offer a retiree or a worker
particular advice or a particular product that are in the financial
adviser's best interests because they carry higher fees or larger
commissions, but those products and services may not be in the worker's
or retiree's best interest.

It is a basic law of economics. If financial advisers are paid more
for recommending a particular fund over another, they will recommend
that fund that they get paid more to recommend, even though it may not
be in the client's best interest. That presents a classic example of
conflict of interest.

Now, I support rulemaking for a fiduciary standard by the DOL, and I
agree that the SEC should thereafter harmonize its rules. Investment
advisers should be held to a standard of care and loyalty to workers
and retirees which requires that the adviser must act solely in the
best interest of the worker who is investing for their retirement.
However, H.R. 1090, in its current form, would harm people saving for
retirement by blocking the DOL's rule and allowing financial advisers
to act in their own financial interest instead of their client's best
interests.

In closing, I urge my colleagues to support this amendment. All
investment advisers must be held to an essential standard of care and
loyalty when providing advice to their clients, particularly clients
who are saving for retirement.
Mr. Speaker, I reserve the balance of my time.

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Mr. LYNCH. Mr. Speaker, the heart of this matter is that my amendment
just changes the standard upon which that advice needs to be made. The
advice that we have in financial advisers giving to retirees and
workers who desperately need the opportunity to invest, you know, these
IRAs and retirement vehicles are a blessing to us. All it does is
require that that advice be given without any conflict, that it be
given in the best interest of the retiree or the worker who is making
that investment. That is the only change here that is required.

I think it is a good change. It is a necessary change. It is one for
the American worker.
I yield back the balance of my time.

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