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Public Statements

Retail Investor Protection Act

Floor Speech

Location: Washington, DC


Mr. ANDREWS. I thank my very good friend for yielding.

Mr. Speaker, so you are in the lunchroom at work. This guy comes in from the investment house, and he shows 18 slides about the red fund--smiling people who are on fishing trips and on European vacations. They are really happy people.

He shows one slide about the blue fund at the very end and finishes his presentation. The red fund looks pretty good. What he doesn't tell you is that he gets 2 1/2 percent of every dollar you put into the red fund, but 1/2 of 1 percent of every dollar you put in the blue fund. He neglects to mention that. So people rush and put their money in the red fund.

Now, should his interest be aligned with you or should his interest be aligned with his own interest? That is the question that is raised by this bill.

The Department of Labor is writing a rule that for the first time would say that that person standing in front of you in that room has a fiduciary obligation to the person listening, that is to say that he has to put the interest of the listener ahead of his own financial interest.

Self-interest is the malignancy that brought the U.S. economy to its knees 5 years ago. People who made mortgage transactions and insurance transactions benefited them and not the people they are supposed to be representing. To permit the cancer of self-interest to invade the second most important asset people have in their lifetime, which is their pension, would be an enormous mistake. That is a mistake that this Department of Labor rule is trying to avoid. This bill is a mistake because it rolls back those efforts and protections for the American people.

John Bogle, the founder and patron of Vanguard, has estimated that nearly 30 percent of people's pension funds have evaporated because of unnecessary fees. If people want to choose a high-fee plan, that is their choice; but they should make that choice only after receiving the advice that is fiduciary, that is directed to their own best interest, from a competent professional.

The Department of Labor rule promotes that result; this bill undercuts that result. For that reason, we should oppose this bill.


Mr. ANDREWS. I thank my friend for yielding.

Mr. Speaker, my friend, the chairman from Texas, asked, I think, a couple of very important questions about this amendment, and he really points out why I support it. First, he asked: Where is the proof that American pensioners have suffered because of conflicted investment advice?

Mr. Speaker, we can all look to the Government Accountability Office, which looked at that very question a few years ago, at Mr. Miller's request and mine and several others, and found that upwards of 27 percent of people's accounts evaporated because of high fees in plans in which they put their money in defined contribution accounts. That is pretty significant proof.

As I said earlier on the floor, they could look to the opinion of someone who is not political at all, I think, someone who is an expert in this field, Jack Bogle, from Vanguard, who uses the number 30 percent in unnecessary fees that have gone up here. Proof is ample that many Americans have rather paltry retirement accounts because of the very high fees that they are paying.

Second, Mr. Speaker, the chairman talked about the suitability standard under the securities law. That is kind of the point. The suitability standard is not a fiduciary standard. The suitability standard assumes an arm's-length transaction between people of equal or similar competence, where it is every investor for him- or herself.

The pension situation is very different. This is a situation where someone is driving a bus or building houses or teaching school or working in a software company, and that is what they do. They don't do investment all the time. So when they turn to someone for advice, they are assuming that that someone is on their side, that the advice that someone is giving them is in their best interests. That is the very nature of a fiduciary relationship.

So I think the questions that were raised point out the reasons to support Mr. Miller's amendment. There is ample evidence of harm that has been done to America's investors; and, secondly, the suitability standard is wholly insufficient to protect the interests of those investors.

For those reasons, I urge a ``yes'' vote on this amendment, and a ``no'' vote on the bill.


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