Retail Investor Protection Act
Floor Speech
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Mr. SCOTT of Virginia. I thank the gen tle lady for yielding.
Mr. Speaker, I rise in opposition to H.R. 2374, the so-called Retail Investor Protection Act. H.R. 2374 delays the Department of Labor's rulemaking process that would protect investors from unscrupulous investment scams.
Now, in past generations, pension plans were what were called ``defined benefit plans'' in which there were defined benefits. You would look at the number of years, your last salary, and the multiple, and you could calculate what your pension would be. But more and more we are seeing defined contribution plans in which the employer just makes a contribution, and the final benefit would be whatever happens to the money over the years with the investment advice that you would be given. The trend has had a profound impact on ultimate retirement benefits and security.
Two people investing the same amount--for example, $100 a month over 30 years--could see very different retirement savings over that same period of time based on the investments they chose. Those investment choices could be the difference between a savings at the end of $100,000 or as much as $500,000 depending on which strategies were used. Now, most employees are not sophisticated investors, and therefore they need advice on what investment strategies should be used. How much should be in stocks? how much in bonds? how much in mutual funds, and which mutual funds? They seek advice.
The rule that the Department of Labor introduced in 2010 and will most likely reintroduce this fall simply requires that an investment adviser provide advice as a fiduciary responsibility to the investor, consistent, therefore, with the best interest of the investor, not with what would ultimately be most profitable to the adviser. That is, he has a duty to give primary consideration to the investor, not to his own profit. There are a lot of different products. A lot of mutual funds have extremely high fees when comparable funds--even better funds--have lower fees. Often the adviser will push products that are totally inappropriate for the investor, which is compromising the investor's retirement security in the long run but which is maximizing the profits for the adviser.
The bill we are considering today will allow investments to be sold which are laden with conflicts of interest and would immunize advisers who give self-serving, unscrupulous advice from any liability. There is an apparent belief that investment advice that is self-serving and full of conflicts of interest is better than no investment advice at all. That is absolutely absurd. There is nothing wrong with those selling investment products to be required to give primary consideration to the investors they are purporting to advise.
The SPEAKER pro tempore. The time of the gentleman has expired.
Ms. WATERS. I yield the gentleman an additional 1 minute.
Mr. SCOTT of Virginia. Mr. Speaker, the bill that we are considering today would delay the rulemaking that would take the necessary steps to protect employees and retirees who are currently being taken advantage of by investment advisers who are giving this unscrupulous advice.
Millions of Americans look to financial advisers for advice. There is nothing wrong with requiring them to have a fiduciary responsibility to those they are advising. It is about time that we make sure the investors are getting the good advice that they deserve. Therefore, we should defeat this bill.
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