Warren Blasts Advisors at Senate Hearing, Pushes Fiduciary Rule

By Alisa Wolking • March 16, 2015 • 0 Comments
As the White House promotes the Department of Labor’s (DOL) reproposal of the fiduciary rule, Sen. Elizabeth Warren (D-Mass.) took the opportunity March 12 to criticize “brokers on Wall Street” and reinforce the administration’s messaging on the controversial proposed regulation.

At a Senate Special Committee on Aging hearing on retirement security, Warren quoted a March 3 New York Times article trumpeting the message that “the standard prescription is that Americans should put more money aside. But this recommendation glosses over a critical driver of unpreparedness: Wall Street is bleeding savers dry.”

Warren hammered the point that “the money Americans manage to scrape together and invest for their retirement is being eaten away by high fees, commissions, and kickbacks that advisors and brokers on Wall Street get for selling lousy retirement products.” In Warren’s view, one of the consequences of the shift from DB plans to DC plans is that Americans are now forced to rely on investment advisors and broker-dealers who “can legally take kickbacks from selling Americans lousy products” and “peddle lousy products that line their own pockets while they drain the savings of their clients.”

During witness testimony, Warren asked Alicia Munnell, Director of the Center for Retirement Research at Boston College, to explain “how Americans’ ability to retire comfortably and securely became dependent on their ability to navigate the stock market.” Munnell responded that she was “shocked that there are so many actively managed funds in these funds, costing these people a big percent of their pile at retirement” and said that she supports the efforts of the DOL to establish a fiduciary standard for broker-dealers.

Warren closed her questioning with a strong pitch for the DOL’s fiduciary proposal, emphasizing the importance of fee-only investment advisors: “There is no easy way out of the problem we have created, and that is the potential conflict that is there from the advisors who take care of themselves rather than taking care of their clients.

“There are a lot of good investment advisors out there who really do put their interests of their clients first and foremost,” she continued, “but the problem is they have to compete with advisors who don’t put their interest first. The only way we fix that is that we change the rule, and say that all investment advisors have to put the interests of the client first.”

Other witnesses included NBC financial editor Jean Chatzky; Michal Grinstein-Weiss, PhD, Associate Professor and Associate Director of the Brown School of Social Work of Washington University; and Rob Carmichael, Human Resources Director of Maine Savings Federal Credit Union.

Alisa Wolking is the Grassroots Advocacy Manager for ASPPA.