WASHINGTON -- Consumer advocates and AARP accused President Donald Trump Friday of putting Wall Street greed ahead of middle class needs.
Yet some in the financial-services industry and free-market Republicans praised the new president for, they said, halting a federal rule that would have prevented retirement savers from getting the best advice.
The reaction depends on whether you believe ordinary Americans too easily get taken advantage of when choosing investments for retirement accounts, and the level of protection they deserve.
Trump puts the brakes on financial-services regulations
Trump on Friday brought out voices from both sides when he signed an executive order to suspend a federal rule that would have required financial advisers, including mutual fund companies, to put the customer's best interest first, even if that meant lower commissions or fees for the adviser.
How could stopping the Fiduciary Rule be good? Conversely, was the rule, which would have started April 1, really necessary in the first place?
Here are opposing voices on both sides. But two points first:
Those favoring the rule -- and decrying Trump's action -- said Americans need protection against advisers and consultants who were more intent on earning big fees and commissions than in helping workers and retirees with recommendations in the customer's best interest.
Plain and simple: Donald Trump is ripping $17B a year away from
families and putting it in the hands of Wall Street.https://t.co/sPeVq7vRxu
Those criticizing the rule -- and praising Trump -- said the rule treated retirement savers as too ignorant to make sound decisions. (Here's a link to a random mutual fund prospectus; treat it as a test.) More importantly, some financial industry groups and the White House said the rule could backfire.
How's that? They said if employees of mutual fund companies or brokerages worried about lawsuits from customers who thought their interests weren't being put first, they'd stop offering advice. Or they'd recommend totally safe, vanilla choices when the customer might need a bit of spumoni. Then only people who could afford to pay an independent adviser would get some of the opinions now dispensed for free when a customer wants to decide on, say, a mutual fund for an IRA.
President Trump's action to delay the #fiduciary rule is a wise one. It's Obamacare for financial planning. https://t.co/IHaPPe30Si
-- Paul Ryan (@SpeakerRyan) February 3, 2017
Not all financial firms hated the rule. Merrill Lynch said it supported it "wholeheartedly." Vanguard, too, said it could work with it, although Vanguard was already known for its low-fee mutual funds.
Fiduciary rule: Time to roll up our sleeves: How to know if you're affected, and how Vanguard ca... https://t.co/CQ7fbkzgVY #mutualfunds
-- Mind-Money-Mistakes (@_Mutual_Funds_) June 14, 2016
With that out of the way, here are some opinions, starting with the praise:
U.S. Chamber of Commerce President and CEO Thomas J. Donohue: "The flawed fiduciary rule's rushed implementation would have jeopardized access to retirement advice and choice while its severe consequences and compliance burdens would have made it harder for small businesses to offer retirement plans."
Gary Cohn, director of Trump's National Economic Council and a former Goldman Sachs president, on CNBC: "They thought they were trying to protect investors in their retirement accounts. But by 'protecting investors,' they highly limited their choices."
Financial Services Institute President & CEO Dale Brown: "On behalf of the retirement savers who depend on their financial advisors, we applaud the president's action, which will delay a rule with devastating consequences for so many people. We stand ready to work with the president and his administration to put in place a uniform fiduciary standard that protects investors, while not denying quality, affordable financial advice to those who need it most.
Rep. Jeb Hensarling, a Texas Republican who chairs the House of Representatives Financial Services Committee: "No unaccountable Washington bureaucrats should get in the way of hardworking Americans and their ability to make financial decisions that are best for their families. Republicans want to empower Americans to make their own financial decisions, but the Obama administration's so-called fiduciary rule instead empowered unelected, unaccountable bureaucrats."
As for the opposition:
AARP Executive Vice President Nancy LeaMond: "It is time that all Americans can count on retirement investment advice that is in their best interest, not the interest of Wall Street. Unfortunately, for many Americans, today's executive order means they will continue to get conflicted financial advice that costs more and reduces what they are able to save for retirement."
U.S. Sen. Sherrod Brown of Ohio, a member of the Senate Finance and Banking committees: "President Trump's action will make it harder for American savers to keep more of what they earn. It's outrageous that Ohio families who are struggling to save and invest for a secure retirement now have to worry that financial institutions aren't putting their customers' interest first."
Karl Frisch, executive director of Allied Progress, a liberal interest group: "If anyone thought Trump filling his administration with Goldman Sachs executives wouldn't result in financial policy that stacks the deck against hard-working Americans, this should finally dispel that notion. "
Rep. Nancy Pelosi, a California Democrat and her party's leader in the House of Representatives: "President Trump's dangerous executive order eliminating the rule requiring financial advisors to act in the best interests of their clients makes hard-working Americans vulnerable to unfair, deceptive, and predatory practices. Retirees, homeowners, and hard-working American families come second in President Trump's Wall Street First agenda."
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