The center of gravity on 401(k) legislation has long been the office of Rep. George Miller (D-CA), who chairs the House Committee on Education and Labor and has taken great interest in issues relating to retirement security in general and defined-contribution plans in particular.
Miller is the lead sponsor of H.R. 2989, which combines fee disclosure provisions with a requirement that investment professionals providing advice to retirement plan participants be genuinely independent. All of which sounds good to us. And to our friends at BrightScope, where Ryan Alfred has posted a comprehensive assessment of H.R. 2989's investment advice component. Here's Ryan's conclusion:
It should be the intent of the legislation to align the standard of care of financial representatives with the expectations of investors and to strengthen investor protections. If "harmonization" is to occur it needs to be the harmonization of investor expectations with the standard of care of their advisers, regardless of whether that financial firm was heretofore regulated as a broker-dealer or an investment adviser. That means upgrading all providers of investment advice to the existing fiduciary standard for investment advisers, not lowering the fiduciary protection via a new "federal fiduciary" standard. Nowhere is this case more clearly evident than with retirement plans, where a higher percentage of investors are unsophisticated and lack the freedoms they have in non-retirement accounts. These investors deserve to have access to conflict-free advice from fiduciary advisers.
We second that enthusiastically.