Trump will roll back Obama rule that protected retirees from getting bilked by their advisers

Bryce Covert

Bryce Covert Economic Policy Editor, Think Progress

On Friday, President Trump plans to sign an executive order rolling back protections put in place by the Obama administration to ensure financial advisers can’t give retirees bad advice to enrich themselves.

Before what became known as the fiduciary duty rule was put in place, advisers who help retirees decide where to invest their money were allowed to steer clients toward products that made the advisers money but weren’t in the clients’ best interest. This practice was costing Americans an estimated $17 billion a year.

One of them was Phil Ashburn. When he was offered a buyout after 30 years at Pacific Bell, he turned to a financial broker for advice on how to invest the money, who told him she would make him rich and he’d be set for life. But after she convinced him to put his money in a variable annuity, which fluctuates based on market performance, his original $355,000 investment went down to just $70,000 by 2015.

The broker had goaded him into that product because it made her money: she worked solely on commission and made $900,000 a year off of selling variable annuities.

Now Ashburn is worried about losing his house, and he and his wife can’t afford holiday gifts for their grandchildren. “This is something I wake up thinking about every morning,” he told ThinkProgress. “My stomach is tied in knots. I feel like a failure. It plays on you mentally and physically.”

The Obama administration’s new rule requires brokers like the one who advised Ashburn to adhere to a “fiduciary standard,” meaning that they have to put clients’ interests ahead of their own when they make investment recommendations. A report released by Sen. Elizabeth Warren (D-MA)’s office on Friday morning detailed all of the predatory practices still being used by financial brokers that the rule would eliminate, such as kickbacks for those who sell annuities. The rule is currently set to take effect in early April.

But on Friday, according to a Wall Street Journal interview with White House National Economic Council Director Gary Cohn, Trump will sign a memorandum instructing the labor secretary to consider revising or rescinding the rule. The agency will have 90 days to take action and will have the final say on what road is taken. Trump has nominated fast food CEO Andy Puzder to lead the department, although he has yet to have a hearing amid heavy criticism over his company’s labor record.

Trump will sign the order directly after a meeting with business owners, including the CEOs of Wall Street firms JP Morgan and BlackRock. He has also surrounded himself with people from the banking industry, including Cohn himself, who was president of Goldman Sachs.

Trump aimed criticism at Wall Street on the campaign trail, saying hedge funds were “getting away with murder” and arguing he had been the toughest on banks. But while rolling back the fiduciary rule is the most concrete action the administration will take on banks Friday, Trump will reportedly sign other orders aimed at weakening industry rules. One executive order to be signed the same day will direct federal regulators to put together recommendations for how to revise the reforms put in place by the Dodd-Frank law passed in the wake of the financial crisis.

Trump has previously promised to destroy Dodd-Frank. He can’t do that on his own without Congress, however, so his order will lay the groundwork for more wholesale changes. “This is a table setter for a bunch of stuff that is coming,” Cohn promised.

There are some things Trump can do on his own, and the administration is indicating that he’s already gearing up. His team has said it will seek to make changes to how the Consumer Financial Protection Bureau, a creation of Dodd-Frank that focuses solely on protecting consumers from abusive financial firms, is structured and staffed. The first move appears to be firing the current director, Richard Cordray, even though Cordray’s term won’t end until July 2018 and he has said he has no plans to step down earlier.

Cohn told the Journal that “personnel is policy” and inserting Trump’s own director could help him influence the agency’s policy, which has so far gotten more than $10 billion in relief for 17 million Americans who were defrauded by financial firms.

Republicans in Congress seem eager to help. Earlier this week, Republican senators introduced a bill that would severely hamper the CFPB’s independence and ability to take swift action by putting five people in charge of it, rather than one, and shrink its overall workforce by making it get rid of three employees for every new one. They promise more sweeping legislation on financial regulation will come soon.

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This was reposted from Think Progress.

Bryce Covert is the Economic Policy Editor for ThinkProgress. She was previously editor of the Roosevelt Institute’s Next New Deal blog and a senior communications officer. She is also a contributor for The Nation and was previously a contributor for ForbesWoman. Her writing has appeared on The New York Times, The New York Daily News, The Nation, The Atlantic, The American Prospect, and others. She is also a board member of WAM!NYC, the New York Chapter of Women, Action & the Media. Follow her on Twitter @brycecovert

Posted In: Allied Approaches

Union Matters

An Invitation to Sunny Miami. What Could Be Bad?

Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

If a billionaire “invites” you somewhere, you’d better go. Or be prepared to suffer the consequences. This past May, hedge fund kingpin Carl Icahn announced in a letter to his New York-based staff of about 50 that he would be moving his business operations to Florida. But the 83-year-old Icahn assured his staffers they had no reason to worry: “My employees have always been very important to the company, so I’d like to invite you all to join me in Miami.” Those who go south, his letter added, would get a $50,000 relocation benefit “once you have established your permanent residence in Florida.” Those who stay put, the letter continued, can file for state unemployment benefits, a $450 weekly maximum that “you can receive for a total of 26 weeks.” What about severance from Icahn Enterprises? The New York Post reported last week that the two dozen employees who have chosen not to uproot their families and follow Icahn to Florida “will be let go without any severance” when the billionaire shutters his New York offices this coming March. Bloomberg currently puts Carl Icahn’s net worth at $20.5 billion.

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