```

[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

                   PRINCIPLES FOR ENSURING RETIREMENT
                  ADVICE SERVES THE BEST INTERESTS OF
                     WORKING FAMILIES AND RETIREES

=======================================================================

                                 HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON HEALTH,
                    EMPLOYMENT, LABOR, AND PENSIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, DECEMBER 2, 2015

                               __________

                           Serial No. 114-35

                               __________

  Printed for the use of the Committee on Education and the Workforce
  
  
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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Duncan Hunter, California              Ranking Member
David P. Roe, Tennessee              Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania         Susan A. Davis, California
Tim Walberg, Michigan                Raul M. Grijalva, Arizona
Matt Salmon, Arizona                 Joe Courtney, Connecticut
Brett Guthrie, Kentucky              Marcia L. Fudge, Ohio
Todd Rokita, Indiana                 Jared Polis, Colorado
Lou Barletta, Pennsylvania           Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada                 Northern Mariana Islands
Luke Messer, Indiana                 Frederica S. Wilson, Florida
Bradley Byrne, Alabama               Suzanne Bonamici, Oregon
David Brat, Virginia                 Mark Pocan, Wisconsin
Buddy Carter, Georgia                Mark Takano, California
Michael D. Bishop, Michigan          Hakeem S. Jeffries, New York
Glenn Grothman, Wisconsin            Katherine M. Clark, Massachusetts
Steve Russell, Oklahoma              Alma S. Adams, North Carolina
Carlos Curbelo, Florida              Mark DeSaulnier, California
Elise Stefanik, New York
Rick Allen, Georgia

                    Juliane Sullivan, Staff Director
                 Denise Forte, Minority Staff Director
                                
                                ------                                

        SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS

                   DAVID P. ROE, Tennessee, Chairman

Joe Wilson, South Carolina           Jared Polis, Colorado,
Virginia Foxx, North Carolina          Ranking Member
Tim Walberg, Michigan                Joe Courtney, Connecticut
Matt Salmon, Arizona                 Mark Pocan, Wisconsin
Brett Guthrie, Kentucky              Ruben Hinojosa, Texas
Lou Barletta, Pennsylvania           Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada                 Northern Mariana Islands
Luke Messer, Indiana                 Frederica S. Wilson, Florida
Bradley Byrne, Alabama               Suzanne Bonamici, Oregon
Buddy Carter, Georgia                Mark Takano, California
Glenn Grothman, Wisconsin            Hakeem S. Jeffries, New York
Rick Allen, Georgia
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on December 2, 2015.................................     1

Statement of Members:
    Polis, Hon. Jared, Ranking Member, Subcommittee on Health, 
      Employment, Labor, and Pensions............................     4
        Prepared statement of....................................     6
    Roe, Hon. David P., Chairman, Subcommittee on Health, 
      Employment, Labor, and Pensions............................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Campbell, Mr. Bradford P., Esq., Counsel, Drinker Biddle and 
      Realth, LLP, Washington, DC................................     8
        Prepared statement of....................................    11
    Doba, Ms. Rachel A., President, DB Engineering, LLC, 
      Indianapolis, IN...........................................    18
        Prepared statement of....................................    20
    Mohrman-Gillis, Ms. Marilyn, Managing Director, Public Policy 
      and Communications, Certified Financial Planner Board of 
      Standards, Washington, DC..................................    27
        Prepared statement of....................................    29
    Gaudreau Jr., Mr. Jules O., CHFC, CIC, President, The 
      Gaudreau Group, Inc., Wilbraham, MA........................    35
        Prepared statement of....................................    37

Additional Submissions:
    Mr. Polis:
        Letter from Financial Planning Coalition, to the Employee 
          Benefits Security Administration.......................    84
        Prepared statement of Mohrman-Gillis, Ms. Marilyn, Esq., 
          Financial Planning Coalition before the Employee 
          Benefits Security Administration.......................   125
        Prepared statement of Ferrara, Mr. V. Raymond, CFP, 
          Financial Planning Coalition before the Employee 
          Benefits Security Administration.......................   127
        Letter dated September 29, 2015, from Financial Planning 
          Coalition..............................................   129
        Letter dated October 26, 2015, from Financial Planning 
          Coalition..............................................   130
        Letter dated October 29, 2015, from Financial Planning 
          Coalition..............................................   131
        Letter dated November 16, 2015, from Financial Planning 
          Coalition..............................................   133
        Letter dated November 16, 2015, from Financial Planning 
          Coalition..............................................   135
    Dr. Roe:
        Bipartrisan House Members Outline Legislative Principles 
          to Ensure Retirement Advisors Protect Clients' Best 
          Interest...............................................   138
        Prepared statement of American Council of Life Insurers..   140
        Investment News: DOL's fiduciary exemption is not a 
          workable option for advisors...........................   143
        Prepared statement of Financial Services Roundtable......   147

 
                   PRINCIPLES FOR ENSURING RETIREMENT
                  ADVICE SERVES THE BEST INTERESTS OF
                     WORKING FAMILIES AND RETIREES

                              ----------                              

                      Wednesday, December 2, 2015

                     U.S. House of Representatives

                Committee on Education and the Workforce

        Subcommittee on Health, Employment, Labor, and Pensions

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
room 2261, Rayburn House Office Building. Hon. David P. Roe 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Roe, Wilson of South Carolina, 
Foxx, Walberg, Guthrie, Heck, Messer, Carter, Grothman, Allen, 
Polis, Courtney, Pocan, Hinojosa, Sablan, Wilson of Florida, 
Bonamici, and Takano.
    Also present: Representatives Kline and Scott.
    Staff Present: Andrew Banducci, Workforce Policy Counsel; 
Janelle Belland, Coalitions and Members Services Coordinator; 
Ed Gilroy, Director of Workforce Policy; Jessica Goodman, 
Legislative Assistant; Callie Harman, Legislative Assistant; 
Tyler Hernandez, Press Secretary; Nancy Locke, Chief Clerk; 
Michelle Neblett, Professional Staff Member; Brian Newell, 
Communications Director; Krisann Pearce, General Counsel; 
Alissa Strawcutter, Deputy Clerk; Juliane Sullivan, Staff 
Director; Olivia Voslow, Staff Assistant; Tylease Alli, 
Minority Clerk/Intern and Fellow Coordinator; Denise Forte, 
Minority Staff Director; Christine Godinez, Minority Staff 
Assistant; Carolyn Hughes, Minority Senior Labor Policy 
Advisor; Brian Kennedy, Minority General Counsel; Kevin 
McDermott, Minority Senior Labor Policy Advisor; Amy Peake, 
Minority Labor Policy Advisor; Saloni Sharma, Minority Press 
Assistant, Arika Trim, Minority Press Secretary; and Elizabeth 
Watson, Minority Director of Labor Policy.
    Chairman Roe. A quorum being present, the Subcommittee on 
Health, Employment, Labor, and Pensions will come to order. 
Good morning, everyone, and welcome to today's hearing.
    Retirement security is something many Americans work hard 
to achieve, but doing so can be very challenging. While many 
individuals understand the need to plan for retirement, they do 
not necessarily know the best way to do so.
    That is why many workers rely on financial advisors to help 
them build a foundation for a secure retirement, and why too 
many others simply retire without the resources they need to 
remain financially stable.
    Men and women who have worked hard all their lives want to 
enjoy their retirement, spending time with their grandchildren, 
taking up a new hobby, or finally getting through the to-do 
list they did not have the time to tackle before, like my 
garage. They do not want to worry about making ends meet or 
leaving their loved ones with a significant financial burden.
    As policy makers, we should be doing everything we can to 
ensure workers are able to effectively plan for life after 
leaving the workforce. Unfortunately, we are here today because 
a proposal from the Department of Labor is threatening to make 
it harder for workers to do just that.
    The administration has said this proposed rule, known as 
the ``fiduciary rule,'' will require retirement advisors to put 
the best interests of their clients above their own financial 
interests. That, of course, is an admirable goal and one we 
agree is worth pursuing.
    Financial advisors should act in their clients' best 
interests, and Republicans have long said we are open to 
modernizing current rules in a way that provides more 
protections to those seeking retirement advice.
    However, as witnesses explained at a committee hearing this 
summer, the Department's rule as proposed will impose on 
financial advisors a host of costly new mandates and burdensome 
regulations that will have far reaching consequences for those 
most in need of assistance, and as with most well intended Big 
Government schemes, it is the people who need help who are hurt 
the most.
    Many low- and middle-income families will lose access to 
some of the most basic retirement advice. These individuals, 
who already have fewer resources to invest, will no longer be 
able to seek guidance from trusted financial advisors and could 
be forced to pay exorbitant fees or fend for themselves online.
    Additionally, small business owners will be denied 
assistance in choosing the best investment options for their 
employees, leaving many small businesses unable to offer any 
retirement plan at all.
    The proposal is so extreme and unworkable that it is 
drawing serious concerns from both sides of the aisle. A 
significant number of Democratic policy makers in both the 
House and the Senate have written to the Department about the 
proposed rule, calling its anticipated effects ``troubling'' 
and urging the Department to ``seek a balanced approach.''
    This committee sent a letter with a similar request asking 
for the withdrawal of the proposal and encouraging the 
Department to work with Congress on a more responsible 
approach.
    Now if this all sounds familiar, there is a good reason. We 
have been through it before. Nearly five years ago, the 
Department pursued a similar regulatory proposal, and similar 
bipartisan concerns were raised.
    The difference is the last time around, the Department 
listened to those concerns, withdrew its proposal, and went 
back to the drawing board to develop a new, albeit similarly 
flawed, rule. This time, the Department seems determined to 
ignore legitimate bipartisan concerns and force its misguided 
rule on the American people.
    That is why I am working along with a number of my 
Republican and Democrat colleagues on this committee and the 
Ways and Means Committee to develop a legislative solution that 
will accomplish what the Department of Labor has failed to do.
    Our proposal will strengthen retirement security, but 
unlike the Department's approach, it will do so without hurting 
working families and small businesses.
    To guide this effort, we developed a set of important 
principles that our bipartisan solution will reflect, such as 
protecting access to the retirement advice workers, retirees 
and small business owners need, and ensuring retirement 
advisors serve their clients' best interests.
    Let me repeat that, their clients' best interests. We 
believe that financial advisors should look out for their 
clients' best interests, but we also believe the rules 
governing financial advice should do no harm to those saving 
for retirement.
    Today's hearing is an opportunity to further explore these 
principles, to hear what our witnesses believe a workable best 
interest standard looks like, and to continue to work to 
introduce a responsible legislative proposal that will help 
individuals save for their retirement.
    I look forward to our discussion and to the work ahead.
    With that, I will now recognize the Ranking Member of the 
Subcommittee, Congressman Polis, for his opening remarks.
    [The information follows:]

  Prepared Statement of Hon. David P. Roe, Chairman, Subcommittee on 
                Health, Employment, Labor, and Pensions

    Retirement security is something many Americans work hard to 
achieve, but doing so can be very challenging. While many individuals 
understand the need to plan for retirement, they don't necessarily know 
the best way to do so. That's why many workers rely on financial 
advisors to help them build a foundation for a secure retirement. And 
why too many others simply retire without the resources they need to 
remain financially stable.
    Men and women who have worked hard all their lives want to enjoy 
their retirement - spending time with their grandchildren, taking up a 
new hobby, or finally getting through the to-do list they didn't have 
the time to tackle before. They don't want to worry about making ends 
meet or leaving their loved ones with a significant financial burden.
    As policymakers, we should be doing everything we can to ensure 
workers are able to effectively plan for life after leaving the 
workforce. Unfortunately, we're here today because a proposal from the 
Department of Labor is threatening to make it harder for workers to do 
that.
    The administration has said this proposed rule - known as the 
``fiduciary rule'' - will require retirement advisors to put the best 
interests of their clients above their own financial interests. That, 
of course, is an admirable goal and one we agree is worth pursuing. 
Financial advisors should act in their clients' best interests, and 
Republicans have long said we are open to modernizing current rules in 
a way that provides more protections to those seeking retirement 
advice.
    However, as witnesses explained at a committee hearing this summer, 
the department's rule - as proposed - will impose on financial advisors 
a host of costly new mandates and burdensome regulations that will have 
far reaching consequences for those most in need of assistance. And as 
with most well-intended Big Government schemes, it's the people who 
need help who are hurt the most.
    Many low- and middle-income families will lose access to some of 
the most basic retirement advice. These individuals - who already have 
fewer resources to invest - will no longer be able to seek guidance 
from trusted financial advisors and could be forced to pay exorbitant 
fees or fend for themselves online. Additionally, small business owners 
will be denied assistance in choosing the best investment options for 
their employees, leaving many small businesses unable to offer any 
retirement plan at all.
    The proposal is so extreme and unworkable that it is drawing 
serious concerns from both sides of the aisle. A significant number of 
Democratic policymakers in both the House and the Senate have written 
to the department about the proposed rule, calling its anticipated 
effects ``troubling'' and urging the department to ``seek a balanced 
approach.'' This committee sent a letter with a similar request, asking 
for the withdrawal of the proposal and encouraging the department to 
work with Congress on a more responsible approach.
    Now, if this all sounds familiar, there's a good reason: We've been 
through it before. Nearly five years ago, the department pursued a 
similar regulatory proposal, and similar bipartisan concerns were 
raised. The difference is that last time around, the department 
listened to those concerns, withdrew its proposal, and went back to the 
drawing board to develop a new - albeit similarly flawed - rule. This 
time, the department seems determined to ignore legitimate bipartisan 
concerns and force its misguided rule on the American people.
    That's why I am working - along with a number of my Republican and 
Democrat colleagues on this committee and the Ways and Means Committee 
- to develop a legislative solution that will accomplish what the 
Department of Labor has failed to. Our proposal will strengthen 
retirement security, but, unlike the department's approach - it will do 
so without hurting working families and small businesses.
    To guide this effort, we developed a set of important principles 
that our bipartisan solution will reflect, such as protecting access to 
the retirement advice workers, retirees, and small business owners need 
and ensuring retirement advisors serve their clients' best interests. 
Let me repeat that: their clients' best interests. We believe that 
financial advisors should look out for their clients' best interest, 
but we also believe the rules governing financial advice should do no 
harm to those saving for retirement.
    Today's hearing is an opportunity to further explore these 
principles, to hear what our witnesses believe a workable best interest 
standard looks like, and to continue our work to introduce a 
responsible legislative proposal that will help individuals save for 
their retirement. I look forward to our discussion and to the work 
ahead.
    With that, I will now recognize the Ranking Member of the 
subcommittee, Congressman Polis, for his opening remarks.
                                 ______
                                 
    Mr. Polis. Thank you, Mr. Chairman, for yielding, and I 
want to thank our witnesses for providing us their time and 
expertise during this busy holiday season.
    Today we are convened again to discuss a very important 
rulemaking process at the Department of Labor that would change 
the way financial advisors operate, and potentially the advice 
that savers receive.
    Specifically, we are discussing the principles that would 
protect savers from conflicted advice and allow good advisors 
to continue to work in their communities on behalf of their 
clients.
    As we know, the reason we are talking about this issue and 
why it is so important is the retirement savings gap for 
Americans is a staggering $14 trillion, with one in five 
Americans who are approaching retirement age having zero in 
their private retirement savings.
    This is obviously a problem and it must be addressed in a 
number of ways. This process around financial advice is just 
one of those aspects to how our nation needs to deal with the 
retirement savings gap.
    The Department of Labor has been engaged in efforts to 
redefine the circumstances under which an individual is acting 
as a ``fiduciary'' when providing investment advice and 
services to retail investors.
    As we all know the history, the Department of Labor 
retracted a first version of this rule several years ago. They 
released a new version of the rule earlier this year, and they 
have begun getting input from a broad spectrum of stakeholders 
through an extended comment period. I again want to thank the 
Department for extending the initial comment period.
    From that first version of the rule to today, I and many of 
my colleagues have been following this issue in detail, because 
it is so important. I have heard from many of my constituents 
and I have engaged with the Department of Labor and 
stakeholders through several letters.
    As I am sure everyone is aware, the Department of Labor 
recently closed its comment period during the rulemaking 
process.
    I believe that based on what I have heard, the Department 
of Labor and Secretary Perez have worked very hard to reach out 
to stakeholders, and I am optimistic that they will make the 
changes necessary to create a good rule. However, in order to 
make sure this happens, I think it is important to include 
expert stakeholders at every opportunity.
    I believe that transparency and an ongoing stakeholder 
process are vital to the success of this rule for savers and 
for financial advisors. That is why I along with about 100 of 
my Democratic colleagues submitted a letter laying out our 
remaining concerns with the drafted rule. We hope that those 
are addressed in the final rule.
    I recently followed up with a letter signed by 47 Democrats 
that urged Secretary Perez to continue the transparency and 
outreach to Congress and stakeholders through an additional 
comment period as changes are made to the rule, as long as the 
timeline remains consistent with being able to finalize these 
rules under the presidency of Barack Obama.
    The enormous amount of feedback and the sheer importance of 
this rule is why I think an additional comment period could be 
helpful, to help inform a better rulemaking process.
    A comment period that is reasonable and constructive would 
help a better rule emerge, and it would give us a detailed look 
at what DOL is planning to make with regard to the changes. We 
are certainly hopeful that DOL will address the issues that 
have been raised by me and my colleagues, but obviously we will 
only know when the rule emerges.
    In fact, I think as a best practice, all agencies should 
have the flexibility to utilize the rulemaking system to allow 
for additional comment periods. Often times, an additional 
comment period after a second draft of the rule can be more 
helpful than simply extending the initial comment period, 
because at least we see where the agency is going with regard 
to their thought process, and it can remove issues from the 
table and allow stakeholders to focus on remaining issues.
    DOL must take into account the high number of outstanding 
questions and requests for comments that are proposed in the 
rule.
    To date, there have been multiple letters requesting 
changes to the proposed rule from members of both parties in 
Congress and more than 3,500 public comments. That is a very 
high number for something that sounds as obscure as a fiduciary 
rule.
    Of course, the amount of public interest is a direct result 
of the economic interest of why it is so important for savers 
on this issue.
    As was shown by my recent vote against H.R. 1090, the so-
called Retail Investor Protection Act, which would have 
effectively killed any rule from moving forward, me and most of 
my Democratic colleagues are not opposed to a rule being 
implemented. In fact, very supportive of the right rule being 
implemented. It needs to be done right, address the legitimate 
concerns of stakeholders, and meet its intended goal.
    Helping Americans save for retirement should not be a 
partisan issue. Whether you are a Democrat or Republican, we 
are all going to need to retire someday, and we all believe it 
is essential for individuals to not receive conflicted advice, 
but we also want to make sure they are still able to receive 
quality advice.
    I think we agree on the intent and spirit of the principles 
before us, but because they are broad, of course, we are going 
to have questions about the specific legislation, that I 
understand might come out of these principles.
    Legislation must accomplish the goal of a strong, 
enforceable, workable regime. The devil is always in the 
details, as we are finding both in the rulemaking process and I 
am sure we would also find in the process of drafting a bill.
    Our goal should not be a product that prevents an 
enforceable conflict of interest standard from being 
implemented but rather furthers it.
    I look forward to hearing from our witnesses and discussing 
the various ideas for updating and improving the rule and 
legislation around fiduciary responsibility.
    I hope this hearing will further an open stakeholder 
process which leads to a rule that is in the interest of all 
Americans. I yield back.
    [The information follows:]

Prepared Statement of Hon. Jared Polis, Ranking Member, Subcommittee on 
                Health, Employment, Labor, and Pensions

    I thank the chairman for yielding to me, and I thank all of our 
witnesses for providing us their time and expertise during this busy 
holiday season.
    Today we are convened again to discuss an important rulemaking at 
the Department of Labor that will change the way financial advisors 
operate, and potentially the advice savers receive. Specifically, we 
are discussing principals that will protect savers from conflicted 
advice and allow good advisors to continue to work in our communities.
    As we all know the retirement savings gap for allAmericans is far 
too high. It is a staggering $14 trillion, with one-in-five Americans 
who are approaching retirement age having zero private retirement 
savings. There is obviously a problem, and it must be addressed in a 
myriad of ways. Access to good, affordable financial advice is one 
important part of the picture.
    DOL has been engaging in efforts to redefine the circumstances 
under which an individual is acting as a ``fiduciary'' when providing 
investment advice and services to retail investors for more than five 
years.
    After the Department of Labor retracted the first version of this 
rule several years ago, they released a new version of the rule in 
early 2015, and have been getting input from a broad spectrum of 
stakeholders through a long comment period. From that first version of 
the rule to today I have been following this issue in extreme detail. I 
have heard from many of my constituents and have engaged DOL and 
stakeholders through numerous letters
    And as I'm sure everyone is aware, the Department of Labor recently 
closed its comment period during the rulemaking process.
    I believe that DOL and Secretary Perez have worked very hard to 
reach out to all stakeholders and I am optimistic that he will make the 
changes necessary to create a workable rule. However, in order to 
ensure this happens the expert stakeholders should be given another 
look.
    I believe that transparency and an ongoing stakeholder process are 
absolutely vital to the success of this rule. That is why I, along with 
almost 100 of my Democratic colleagues, submitted a letter laying out 
our remaining concerns with the drafted rule. I recently followed that 
up with a letter signed by 47 Democrats, which requested Secretary 
Perez continue his transparency and outreach to Congress through an 
additional comment period and stakeholders as changes are made to the 
rule.
    The enormous amount of feedback and the sheer importance of this 
rule is why I believe an additional comment period, which will not kill 
the rule, in order to give a look at the changes DOL is planning to 
make to the rule is reasonable and constructive. Nothing is perfect on 
the first or second shot, and bringing stakeholders together for 
another look can only strengthen the rule. In fact, I believe all 
agencies should have the flexibility to utilize the rulemaking system 
to allow for additional comment periods. I hope this can serve as a 
model for large and complex rule makings moving forward.
    DOL must take into account the high number of outstanding 
``Questions'' and ``Requests for Comments'' they proposed in the Rule, 
as well as the incredible volume of feedback the Rule has received. To 
date, there have been multiple letters requesting changes to the 
proposed Rule from members of both parties in Congress, as well as more 
than 3,500 public comments, and hundreds of thousands of folks signing 
their names to petitions. DOL must listen to this feedback, continue to 
work with stakeholders and make the rule more streamlined while 
protecting investors and workers.
    As was shown by my recent vote against the partisan H.R. 1090, the 
so-called Retail Investor Protection Act (which would have effectively 
killed any rule from moving forward), I am not opposed to a rule being 
implemented. I simply believe it needs to be done right, and the best 
way for that to happen is to continue the stakeholder process. The near 
unanimous opposition from my side of the aisle against H.R. 1090 shows 
that while many of us have concerns with the rule, we believe a new 
rule needs to be finished and implemented.
    Helping Americans save for retirement shouldn't be a partisan 
issue. Whether you're a Democrat or a Republican, eventually you're 
going to need to retire. We all believe it is essential for individuals 
to not receive conflicted advice, but we also need to make sure they're 
still able to receive advice; period.
    Investors must be able to trust the person advising them about the 
money they need to live after retirement. But on the other hand we must 
also protect individuals' and small business' access to advice. 
Mistakes in investments cost billions of dollars to individuals and the 
economy.
    I know that everyone involved in this rule, and all the 
stakeholders who will be impacted, agree that financial advisors should 
use a ``Best-Interest Standard'' and the bi-partisan principals that 
are the subject of this hearing show this agreement.
    I think we all agree on the intent and the spirit of the principals 
before us. However, because they are broad, I have questions about the 
specific legislation that I understand will come out the principals. 
Legislation must accomplish the goal of a strong, enforceable, but 
workable regime. As they always say, the devils are in the details. 
Whether it is a rule completed by DOL, or Congressional action, a final 
rule must work with the majority of advisors who are acting in good 
faith as well as protect savers. Our goal should not be to prevent an 
enforceable conflict of interest standard from being implemented.
    I look forward to hearing from our witnesses, and discussing the 
various ideas for an updated rule.
                                 ______
                                 
    Chairman Roe. I thank the gentleman for yielding. Pursuant 
to Committee Rule 7(c), all subcommittee members will be 
permitted to submit written statements to be included in the 
permanent hearing record, and without objection, the hearing 
record will remain open for 14 days to allow statements and 
questions for the record, and other extraneous materials 
referenced during the hearing to be submitted in the official 
hearing record.
    It is now my pleasure to introduce our distinguished panel 
of witnesses. First, The Honorable Brad Campbell, counsel at 
Drinker Biddle & Reath LLP. From 2007 to 2009, he served as 
Assistant Secretary of Labor for the Employee Benefits Security 
Administration. He specializes in employee benefits and ERISA 
Title I issues, including fiduciary conduct and the prohibitive 
transaction rules. Welcome, Mr. Campbell.
    Ms. Rachel Doba is founder and president of DB Engineering, 
headquartered in Indianapolis, Indiana. DB Engineering is a 
civil engineering firm that specializes in civil/site, water/
wastewater, and transportation engineering services. Welcome to 
Washington.
    Ms. Marilyn Mohrman-Gillis is Managing Director of Public 
Policy & Communications of the Certified Financial Planner, the 
CFP, Board. The CFP Board fosters professional standards in 
personal financial planning through its setting and enforcement 
of education, examination, experience, ethics, and other 
requirements for CFP certifications. Welcome.
    Mr. Jules Gaudreau is the president of The Gaudreau Group, 
Inc., an insurance and financial services agency founded in 
1921 and headquartered in Wilbraham, Massachusetts. Mr. 
Gaudreau also serves as president of the National Association 
of Insurance and Financial Advisors. Welcome, Mr. Gaudreau.
    I will ask our witnesses to stand and raise your right 
hands, please.
    [Witnesses sworn.]
    Chairman Roe. Thank you. Let the record reflect that the 
witnesses answered in the affirmative. You may take your seats.
    Before I recognize you to provide your testimony, let me 
briefly explain our lighting system. You have five minutes to 
present your testimony. When you begin, the light in front of 
you will turn green. When one minute is left, the light will 
turn yellow.
    When your time has expired, the light will turn red. At 
that point, I will ask you to wrap up your remarks as best as 
you are able. I will be fairly strict about that, so try to 
wrap up when you get to the five minute mark.
    Mr. Campbell, you are recognized for five minutes.

   TESTIMONY OF BRADFORD P. CAMPBELL, ESQ., COUNSEL, DRINKER 
             BIDDLE & REATH, LLP, WASHINGTON, D.C.

    Mr. Campbell. Thank you to the chairman and the ranking 
member and the other members of the Committee for the 
opportunity to testify today regarding the principles that 
should guide legislation, strengthening the retirement advice 
for ERISA plans, plan participants, and IRA owners.
    Before I begin, I would like to indicate that my remarks 
today are my own views, not those of my firm or of any client 
or my colleagues. I am just here representing myself rather 
than a client.
    Currently, I am an ERISA attorney in private practice. I 
focus, as the chairman indicated, on ERISA fiduciary issues and 
prohibited transactions. From 2006 to 2009, I served as the 
Assistant Secretary of Labor for Employee Benefits, and head of 
the Employee Benefits Security Administration, the agency that 
is promulgating the rule at the Department of Labor that we are 
discussing.
    The bipartisan principles that the chairman and his 
colleagues have developed I think are a very important step 
forward in the current debate about how to improve retirement 
savings advice. I think they offer common sense guidelines that 
would form a solid foundation for the development of meaningful 
legislation that protects investors while expanding access to 
advice.
    I also think though that these bipartisan principles 
highlight some of the very serious policy and technical 
problems with the Department of Labor's flawed regulatory 
proposal, that I believe if promulgated as proposed, would in 
fact harm the very persons that it is intended to protect.
    Unlike the bipartisan principles, I think the DOL proposal 
would actually reduce choices, increase costs, increase 
frivolous litigation, and therefore reduce the availability of 
advice, particularly for small plans and small IRA accounts.
    In fact, I think the DOL proposal violates nearly every one 
of the bipartisan principles that we are discussing today. The 
first is access to quality advice. The bipartisan principles 
would protect access to investment advice and education for low 
and middle income workers and retirees, and ensure that small 
business owners have access to the financial advice and 
products they need.
    This is something that the Labor Department has actually 
quantified for us, the cost of no advice. In 2011, the Labor 
Department, in promulgating certain provisions of the Pension 
Protection Act, determined that lack of access to advice cost 
participants and IRA owners $100 billion every year due to 
preventable investment errors, and part of the reason there was 
lack of access was due to the very broad ERISA fiduciary and 
prohibited transaction rules that prevented access to advisors.
    In contrast to the bipartisan principles, rather than 
mitigating the negative effects, unfortunately, the DOL 
proposal would actually broaden that problem by more broadly 
applying those same ERISA fiduciary standards and prohibited 
transaction rules, exacerbating the difficulty of getting 
advice to workers.
    The bipartisan principles would require advisors to act in 
the best interest of their clients. By contrast, the DOL 
proposal, although it is appropriated to phrase best interest 
does not create a new best interest standard. It instead 
applies the existing ERISA and fiduciary standards more 
broadly, and the level fee requirements and the effect of these 
prohibited transaction rules do not take into account the 
actual content of the advice. They can in fact actually prevent 
an advisor from acting in your best interest.
    The DOL proposal would prevent essential activities based 
on structural cost differences between products that do not 
actually have anything to do with the quality advice.
    For example, we can all agree that a rollover for a 
participant is in that participant's best interest. There could 
be no dissent on that point. Everyone looked at that 
transaction and said this makes sense for that participant; 
this is in their best interest.
    Because an IRA is a retail product that typically has a 
higher fee than a 401(k), the advisor to that 401(k) would be 
prohibited from doing the rollover, advising the rollover for 
that participant because they would receive a higher fee. That 
has nothing to do with conflict. It has to do with structural 
cost differences. The DOL proposal would nonetheless prevent 
that.
    The best interest contract exemption, which the DOL has 
proposed to address some of those circumstances, unfortunately 
does not work as it is proposed. It would apply a large number 
conditions and would allow new class action litigation risk 
that does not exist currently, and that render that exemption, 
as I said, I think, unworkable for many if not most advisors.
    The bipartisan principles called for clear, simple, and 
relevant disclosures of compensation, investment fees, and any 
conflicts.
    By contrast, the big exemption in this part of the proposal 
has disclosures that are anything but clear and simple. In 
fact, they are extremely difficult for anyone to try to parse 
through, for advisors to provide, and for participants to 
understand.
    The bipartisan principles say the law should never deny 
people the financial information they need to make informed 
decisions. By contrast, the big exemption in the Department's 
proposal directly prohibits an advisor from discussing 
investments that are not on the Government's approved list of 
investable assets, regardless of whether such information is in 
the best interest of the participant.
    Finally, the bipartisan principles call for policies that 
preserve investor choice and consumer access in a way that does 
not pick winners and losers. By contrast, the DOL proposal 
limits those choices and would definitely result in winners and 
losers, not just among financial service providers, but also 
with plans and participants.
    The DOL proposal would deny small plans and individuals 
access to the same types of advisors and information available 
to large plans.
    In closing, I am very much encouraged that Congress has 
begun to look at this issue, has developed these principles, 
and I think Congress in fact is the proper institution to 
address these concerns and to meld the proper changes into the 
broader framework of financial regulation rather than one 
agency with a narrow focus on one body of law.
    Thank you very much, and I look forward to your questions.
    [The testimony of Mr. Campbell follows:]
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    Chairman Roe. Thank you, Mr. Campbell. Ms. Doba, you are 
recognized for five minutes.

 TESTIMONY OF RACHEL A. DOBA, PRESIDENT, DB ENGINEERING, LLC, 
                     INDIANAPOLIS, INDIANA

    Ms. Doba. Thank you, Chairman Roe, Ranking Member Polis, 
and members of the subcommittee for the opportunity to testify 
today.
    I am Rachel Doba, president of DB Engineering. I am here 
representing the U.S. Chamber of Commerce, and I also sit on 
its Small Business Council.
    At the outset, I would like to express our strong support 
for the bipartisan principles discussed to date to ensure that 
retirement advice serves the best interests of working 
families, retirees, and small businesses throughout the 
country.
    I would like to extend a special thank you to Chairman Roe 
for his work on these principles and ongoing commitment to 
retirement security.
    DB Engineering is a civil engineering firm that I founded 
in 2008. I had my first full-time employee in 2010, and set up 
a 401(k) plan a year later. I currently have 15 employees, and 
a 100 percent plan participation rate. The plan has a 
discretionary match, but beginning 2016, I am moving to a safe 
harbor plan, which guarantees a contribution of 3 percent of 
employee compensation and will allow me to provide profit 
sharing contributions.
    Attracting good talent is important for service oriented 
businesses like mine; one way that we are able to compete is by 
offering employee benefits, including a retirement savings 
plan. Retirement security is not just a recruitment tool it is 
a personal priority.
    In order to start my business in 2008, I cashed out my 
401(k) account at my former employer to get the needed startup 
capital. In addition to taking a 10 percent penalty and income 
tax hit, this withdrawal occurred in the midst of the 2008 
financial crisis. I withdrew my savings at the worst possible 
time.
    Had I consulted a financial advisor, I likely would have 
left as much of the funds as possible in my 401(k) or rolled 
over to an IRA. That is why the principle stating that public 
policy should never deny individuals the financial information 
they need to make informed decisions is so critical.
    I have worked with my advisor since 2011. He is a critical 
part of my team. I trust him to help me with implementing and 
maintaining my retirement plan, and my employees trust him to 
provide educational materials that will help them make sound 
financial decisions.
    I am convinced that without our financial advisor, most of 
my employees would not contribute to the 401(k) plan and would 
not receive the benefit of matching contributions. That is why 
another principle stating public policies must protect access 
to investment advice and education for low- and middle-income 
workers and retirees is also critical.
    While all of the principles being discussed today are 
important, I want to particularly highlight one of them: small 
business owners should have access to the financial advice and 
products they need to establish and maintain retirement plans 
and help workers plan for retirement.
    As a small business owner, I absolutely agree. Limiting 
options reduces competition, which drives up costs for my small 
business and passes on costs to employees and me as 
participants in the plan.
    Turning to the Department of Labor's proposed rule, the 
Chamber has submitted a comment letter outlining the many ways 
the rule is unworkable. Today, I would like to highlight three 
issues that will have a particularly negative impact on small 
business plans.
    First, the seller's carve-out discriminates against small 
businesses and will decrease access to much needed guidance.
    Under the proposal, there is a carve-out for advisors that 
are selling or marketing materials known as the seller's carve-
out that does not apply to small businesses. The DOL seems to 
believe that small business owners, such as me, are not as 
sophisticated as the large businesses and need additional 
protections.
    I know when I am being sold a product. Otherwise, I would 
not be able to run a successful business.
    Second, the changes to the education carve-out will 
restrict access to investment education for both small business 
owners and their employees. My employees value the investment 
education provided to them, specifically providing investment 
recommendations in various asset classes. This allows them to 
make informed investment decisions. Many of my employees might 
not invest in the plan at all if the company had not provided 
this benefit.
    By disallowing any party to make the link between asset 
classes and specific investment options, the DOL is forcing 
plan participants to figure out how to invest their own 
retirement savings and risk making poor decisions, like I did.
    Third, the best interest contract exemption will increase 
the cost of services to small businesses and possibly eliminate 
access.
    There is a question on whether advisors to small business 
plans are able to use the BIC exemption, but, even assuming 
they are, there are certain to be additional costs associated 
with these changes. As a business owner who allows on outside 
professionals to manage my plan, any additional costs imposed 
by the regulations will be passed on to me.
    In fact, this directly contradicts the bipartisan principle 
of not choosing winners and losers when small businesses will 
either not be able to use the exemption or will pay more to do 
so.
    In conclusion, I am very concerned that the DOL proposal 
will not achieve its goal of better protecting workers and 
retirees, but will instead make it harder for small business 
employers and employees to access financial advice and to 
increase retirement savings.
    Thank you for the opportunity to testify before you today, 
and I look forward to any questions you may have.
    [The statement of Ms. Doba follows:]
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    Chairman Roe. Thank you, Ms. Doba. Ms. Mohrman-Gillis, you 
are recognized for five minutes.

TESTIMONY OF MARILYN MOHRMAN-GILLIS, MANAGING DIRECTOR, PUBLIC 
 POLICY & COMMUNICATIONS, CERTIFIED FINANCIAL PLANNER BOARD OF 
                  STANDARDS, WASHINGTON, D.C.

    Ms. Mohrman-Gillis. Chairman Roe and Ranking Member Polis, 
members of the Subcommittee, thank you for the opportunity to 
testify here today.
    I am here today on behalf of the Financial Planning 
Coalition, which is comprised of the Certified Financial 
Planner Board of Standards, the Financial Planning Association, 
and the National Association of Personal Financial Advisors.
    We believe that the Coalition brings a unique perspective 
to the table. Our stakeholders and members have committed by 
virtue of their CFP certification or membership codes of 
conduct to provide financial planning services under a 
fiduciary standard. They provide fiduciary level services under 
different business models as investment advisors, as broker-
dealers, and as insurance producers, and across compensation 
models, including commission and fee models.
    We believe that updating the outdated 40-year-old 
definition of ``fiduciary'' under ERISA is essential and a long 
overdue reform to protect America's retirement investors. That 
is why we support the DOL's re-proposed rule.
    We also believe that congressional intervention in this 
administrative rulemaking process at this time is not necessary 
and would only serve to delay or derail the rule.
    For members of Congress who truly want a best interest 
standard for retirement savers, allowing the DOL to proceed to 
a final rule without intervention is the best way to achieve 
that goal.
    You have heard much speculation and misinformation about 
the potential impact of the rule. We have a different view 
based not on speculation but on actual experience with the 
fiduciary standard. CFP Board adopted a fiduciary standard in 
2007. At that time, many firms and industry organizations made 
arguments similar to those being made today about the DOL rule. 
They asserted that the CFP Board's fiduciary requirement was 
unworkable with their business models, that CFP professionals 
and their firms would be forced to relinquish their 
certification if required to provide fiduciary services.
    Contrary to these predictions, the sky did not fall, just 
the opposite. The number of CFP professionals has grown by 30 
percent to 73,000 since we put the fiduciary rule in place.
    Opponents argue that the rule will eliminate the broker-
dealer business model and force advisors into fee only models 
that will be more expensive for consumers.
    This is not consistent with the rule as written or with our 
experience implementing a fiduciary standard. Advisors do not 
need to give up commissions. The best interest contract 
exemption is a principle-based business model neutral exemption 
that allows advisors to continue to charge commissions and 
still comply with the fiduciary standard under ERISA.
    To those that say that the BIC exemption requirements are 
unworkable, we point to our own code of professional conduct, 
which contain requirements that are very similar to the BIC 
exemption requirements.
    CFP professionals today are operating under these BIC 
exemption like requirements for commission based, not just fee 
based, business models.
    Opponents also argue that advisors who are required to 
obligate themselves to act in the best interest of their 
clients will be unable to serve middle-class clients. Again, 
our experience and research belies this argument.
    Today there are thousands of CFP professionals and FPA and 
NAPFA across the country who provide fiduciary level services 
to every day Americans under commission based business models.
    If our experience is any indication, firms and advisors are 
more likely to adjust their policies and practices than to 
abandon middle-class clients.
    In our view, the robust and transparent rulemaking process 
in which the DOL has been engaged for the last five years is 
working precisely as intended. The DOL has publicly indicated 
that it plans to make changes to address issues raised by us 
and other stakeholders.
    Congressional intervention in this final stage of the 
rulemaking process before the DOL has the opportunity to 
promulgate a final rule incorporating all of this public input 
is unnecessary and would serve to delay or derail the rule.
    The legislative principles as proposed by Representatives 
Roskam and Neal, as well as their articulated goals, are 
laudable. Legislation to achieve these principles and goals is 
not necessary. The DOL re-proposed rule already embraces these 
goals and is fully consistent with and far exceeds the proposed 
principles.
    Retirement investors face a perfect storm in today's 
financial services marketplace with a regulatory structure that 
rewards advisors to recommend products that cause investors to 
lose billions of dollars. With ever increasing responsibility 
for their own retirement security, retirement investors more 
than ever require un-conflicting financial advice that is in 
their best interests.
    We urge Congress to refrain from legislation and allow the 
DOL to promulgate its long overdue and badly needed rule. Thank 
you.
    [The statement of Ms. Mohrman-Gillis follows:]
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    Chairman Roe. Thank you. Mr. Gaudreau, you are recognized 
for five minutes.

TESTIMONY OF JULES O. GAUDREAU, JR., CHFC, CIC, PRESIDENT, THE 
         GAUDREAU GROUP, INC., WILBRAHAM, MASSACHUSETTS

    Mr. Gaudreau. Thank you, Chairman Roe, Ranking Member 
Polis, and members of the Subcommittee, and good morning. I am 
Jules Gaudreau, president of NAIFA, the National Association of 
Insurance and Financial Advisors, and owner of The Gaudreau 
Group, a multi-line insurance and financial services firm, 
founded in 1921 by my grandfather, and headquartered in 
Wilbraham, Massachusetts.
    NAIFA members are in every congressional district--I am 
sure you have all heard from them--and work primarily with 
families and small businesses that would be considered main 
street people.
    My firm insures over 6,000 families and businesses in 12 
states. Like most of our NAIFA members, over 80 percent of our 
clients are middle-income Americans with household incomes 
below $100,000. Most of my clients started out as new savers 
and most likely would not have started systematic retirement 
savings without my encouragement and advice.
    When we engage businesses in my community, we spend many 
hours discussing the importance of secure retirement and the 
importance of attracting and retaining employees who wish to 
participate in a retirement plan. We then design the plan, 
ensuring compliance with qualified plan rules. We educate and 
enroll their employees, and we assist in a myriad of 
administrative duties, such as preparation of year-end 5500 
reports.
    I promise that none of these business owners would have 
gone through this important process if it began with an invoice 
for our services. You see, we only get paid when the job is 
done and action is taken by our clients. The result is a plan 
available for employees, likely with employer matching, and is 
a step in the right direction toward retirement readiness and 
security. We also source and service thousands of pre- and 
post-retirement individuals with information and advice on 
retirement security.
    Our disagreement is not with the enhanced standard of care 
fiduciary rule, but rather with the details. Almost everybody 
agrees that the DOL rule as proposed is fraught with problems. 
Over 200 members of Congress have sent letters expressing their 
concerns. The DOL received hundreds of thousands of letters. 
FINRA has expressed concerns, and most significantly, even the 
DOL itself has acknowledged there are many problematic 
provisions.
    The effort to craft a bipartisan legislative alternative to 
the DOL proposal is critically important. The principles upon 
which the alternative will be based are exactly right: a 
partisan legislative alternative will protect retirement 
savers' investment choices, their access to professional advice 
and education, and their hard earned savings.
    Again, NAIFA applauds and thanks you for your leadership on 
this critical issue.
    We do not believe that the DOL rule is consistent with the 
principles described by Representatives Roskam and Neal, and 
the other leaders of this effort, including you, Mr. Chairman.
    For example, the DOL favors fee-only arrangements that will 
result in less access to education and advice and fewer choices 
for many savers who cannot afford such fee-only arrangements. 
Advisors in my firm offer and use both fee based models and 
commission models, depending upon the specific needs and 
desires of our clients.
    We are not opposed to fee-only arrangements, but we 
strongly believe that preserving consumer choice is critical. 
We also believe that the DOL rule is inconsistent with the 
principle protecting consumer access to professional advisors. 
The DOL has stated consumers can take advantage of technology 
in place of personal advisors. We disagree.
    My father cannot even order groceries online for delivery, 
and I have zero confidence that in the absence of professional 
advice that he could learn about asset allocation, make 
investment decisions, or figure out how much he can withdraw 
without spending his savings too quickly.
    It has become clear from DOL public statements that they 
intend to rush this rule to meet their objective of having it 
final and effective before change in the current 
administration. DOL has stated that they do not intend to re-
propose the rule or to open a new comment period before issuing 
a final regulation.
    For these reasons, among others, we believe it is time for 
Congress to act and act now and expeditiously. We do not 
believe this is a partisan issue, and we believe the families 
and businesses we serve are entitled to access to retirement 
education, access to affordable advice, and seamless 
implementation of the easily understood rules to assure 
retirement savers are relying upon advice in their best 
interests.
    We are confident bipartisan legislation can achieve the 
common goal expressed repeatedly in this committee's earlier 
hearing and articulated by Secretary Perez as DOL's North Star. 
That being an enforceable best interest standard.
    We are not confident that the DOL can revise their 
complicated rule without further review and input, a process 
they are rejecting.
    We are grateful to you for having this hearing and for 
working on a sound legislative alternative to DOL's proposed 
fiduciary conflict of interest proposal.
    Our written testimony included numerous compelling stories 
about the importance of financial advisors to middle-income 
Americans.
    Thank you for allowing us to comment today. We look forward 
to your questions.
    [The statement of Mr. Gaudreau follows:]
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    Chairman Roe. Thank you, Mr. Gaudreau. I will now yield to 
Mr. Wilson from South Carolina for five minutes.
    Mr. WILSON of South Carolina. Thank you, Dr. Roe, and thank 
you for your bipartisan leadership on this issue addressing a 
bipartisan alternative.
    Mr. Gaudreau, the National Association of Insurance and 
Financial Advisors, NAIFA, has assisted families and businesses 
professionally and competently in the midlands of South 
Carolina since 1931. Your members are important civic leaders 
in our state, and very much appreciated. People know they can 
count on them. Thank you, you should be really proud of the 
people you work with.
    Can you tell us what the impact of the proposed fiduciary 
rule will have on your Association's ability to serve your 
clients?
    Mr. Gaudreau. We believe this is an unworkable standard 
that will drive advisors away from the small- and middle-income 
investor, and thus, deprive Americans in those markets with 
access to qualified financial advice, the very people who need 
it the most.
    A similar scheme was tried in the United Kingdom, and 
despite the comments of the DOL and others who were in favor of 
this rule, the reality there is that Parliament in the United 
Kingdom is considering what they call a public policy solution 
to fix the gap advice over there, because hundreds of thousands 
of people in their country are suffering from the lack of 
financial advice that we fear this rule would cause in America.
    Mr. WILSON of South Carolina. I was really impressed, Ms. 
Doba, with your experience and your firm. According to the U.S. 
Chamber of Commerce, small business owners through savings and 
incentive matched plans, employee's IRA plans, and simplified 
employee pension IRA plans provided $472 billion in retirement 
savings to over 9 million American households.
    However, the largest gap in coverage for retirement savings 
is with small businesses. These small business owners and 
employees should have a retirement savings plan that works.
    How would this Department of Labor proposed increase 
problems that small business employees face when seeking 
retirement savings advice?
    Ms. Doba. I can really only speak from my experience and my 
perspective, but I know when I started my company, cashing out 
my 401(k) and what have you, and I had worked at another firm 
that had a retirement--they did not have a retirement plan 
because it was just too difficult or they did not want to deal 
with it, so I honestly did not think I would be implementing a 
401(k).
    Had this rule been in effect at that time, I can guarantee 
you that I would not have started a 401(k). As a small business 
owner, most people that are looking at starting to provide 
benefits, they are dealing with starting a company.
    They are putting health insurance plans together, just 
trying to make payroll, having added costs put on top of that, 
you are already in a cash flow situation, so you have a bunch 
of hurdles already to go through, and as a small business, 
there is already a stigma attached to it, not providing quality 
benefits to our employees. We are constantly battling that.
    I just had an employee that I hired a week ago, and he 
almost didn't take the interview because his perception was as 
a small business, we could not compete with his large company 
he was moving from, benefit wise.
    Mr. WILSON of South Carolina. Congratulations on your 
deserved success. I can see your empathy for the people you 
work with, a great team.
    Ms. Doba. Thank you.
    Mr. WILSON of South Carolina. Secretary Campbell, in your 
opinion, how will this proposal change a fiduciary's ability to 
give advice to those who need it the most? Will this proposal 
have a greater impact on lower- and middle-income individuals 
rather than higher income?
    Mr. Campbell. Yes, I believe that it will, and I think that 
is one of the real problems with this proposal, that it is 
going to impose additional litigation risks, additional 
compliance costs, and disrupt a lot of the processes that 
currently are occurring that provide services to participants 
and to IRA owners in a way that is going to result in those 
additional costs, which is going to of necessity have to have 
advisors charge more to be able to stay where they are.
    I think another important thing to understand is when we 
talk about a fiduciary standard, ``fiduciary'' is sort of a 
catch all word that applies to a lot of different standards. 
What the standard DOL is trying to apply here is the ERISA 
fiduciary standard, which is quite different than the 
securities fiduciary standard that the CFP, for example, is 
embracing.
    It is a much more restrictive standard, particularly when 
you put it with the prohibitive transaction rules, such as the 
ability of an advisor to even assist a participant with a 
rollover. That is a structural difference in cost, which is 
perceived as a conflict by the rule, and therefore, requires 
the use of special rules to be able to even do that 
transaction.
    When you go through all that process, there is a lot more 
litigation risk and a lot of more costs associated with it.
    Mr. WILSON of South Carolina. Thank you for your insight 
and your background at DOL should be very helpful to the 
persons currently at DOL. Thank you very much.
    Chairman Roe. I thank the gentleman for yielding. Mr. 
Polis, you are recognized.
    Mr. Polis. Thank you. Ms. Mohrman-Gillis, most financial 
advisors currently seek to do what is in the best interest of 
their clients, including those certified by your organization. 
As is the case in all fields, there are a few bad actors. That 
is the reason we have a formal standard in place.
    Now, there has been a good deal of discussion that the 
financial advisors would stop serving clients under the 
Department of Labor rule. As I understand it, the CFP Board and 
those certified by the Board already use a conflict of interest 
standard.
    My question is can you explain why you believe a strong 
conflict of interest standard is important to savers, and what 
has been the experience of your Board and its advisors with the 
fiduciary standard, and how are individuals certified by your 
organization going to be impacted if there is a similar rule to 
the one proposed by DOL?
    Ms. Mohrman-Gillis. Thank you. I appreciate that question 
because we have heard a lot of comment about what the impact of 
this rule is going to be on small savers, on the middle class, 
on small businesses.
    We speak not from speculation but we speak with experience 
of putting a fiduciary rule in place, of putting requirements 
in place that are very similar to the BIC like requirements, to 
essentially act in the best interest of the client, have a 
written contract, provide disclosures of conflicts of interest, 
and mitigate those conflicts of interest.
    Our experience has been that it will not prevent advisors 
from providing services under commission based business models. 
Our advisors, we have CFP professionals, FPA, and NAPFA members 
across the country who are providing services either under 
commission based business models or for low fees or low assets 
under management, not only to middle class clients but others.
    One example is Mr. Ray Ferrara. He testified at the DOL 
hearing. He is a CFP professional in Florida, chairman and CEO 
of ProVise Management. He provides advice to small business 
owners, 401(k) plans who collectively have 1,800 participants 
with a balance of $50,000 in their average account. He provides 
advice on a commission basis and on a fee basis. He provides 
advice that is in their best interests.
    He testified at the hearing that he will continue to 
provide that advice under a DOL rule, and he further testified 
that for those who claim they are not able to serve the middle-
class clients under a fiduciary standard, ProVise and scores of 
CFP professionals across the country stand ready to fill that 
gap.
    Mr. Polis. If you can submit that testimony, I can enter it 
in our congressional record as well. I would love to see that.
    One of the issues that many of us have been concerned about 
is the lack of financial literacy. I wanted to give you a 
chance as well as Mr. Campbell a chance to address how you see 
the rule impacting financial literacy and education, and what 
could be improved to ensure that we do not impede financial 
literacy and education. You each have about 45 seconds.
    Ms. Mohrman-Gillis. Well, first of all, the DOL rule will 
not impede the ability of advisors to provide educational 
advice--education to their clients. Under the--
    Mr. Polis. That is to their clients, that is after they 
have signed on, correct?
    Ms. Mohrman-Gillis. No, not after they have signed on.
    Mr. Polis. Okay. You said ``clients.''
    Ms. Mohrman-Gillis. We do not believe that the rule as 
written or the rule as we expect the DOL to modify it will 
require advisors to essentially shove a contract in the face of 
their clients and require them to sign the contract before they 
are able to provide them with information--
    Mr. Polis. Thank you. For my last 45 seconds of time, I 
want to give Mr. Campbell a chance to address many of our 
concerns about impacting financial literacy and education in 
this rule.
    Mr. Campbell. Yes. The rule, while it does still preserve a 
rule for education that is not advice, it does restrict and 
narrow that from what the current standard is and in a way that 
I think is very unhelpful.
    For example, if you are providing a participant in a 401(k) 
plan a model asset allocation portfolio that says here is what 
someone like you would consider by asset class, you know, 40 
percent in large cap, et cetera, the DOL proposal would 
actually not allow you to then connect the dots and say and in 
your plan, those funds are, and that would suddenly become 
fiduciary advice.
    I think that really undermines the purpose of that 
education. I am hopeful the Department will change that, but as 
proposed, I think it is very much an imposition and restriction 
on the ability to provide useful education.
    Mr. Polis. Thank you, and I yield back.
    Chairman Roe. I thank the gentleman for yielding. Dr. Foxx, 
you are recognized.
    Ms. Foxx. Thank you, Chairman Roe, for holding this 
hearing. I want to thank the witnesses for being here today. 
There may not be another issue before our committee's 
jurisdiction that I have heard more about from my constituents 
than this one.
    It is easy to understand why they are so concerned. Just as 
in the Department's first effort several years ago, this rule 
is predicated on a belief that Government knows best and 
private financial advisors will not act in the best interest of 
their clients. I disagree.
    Why would my constituents have any confidence that a new 
Government driven regime for financial advice will turn out any 
better than the implementation of ObamaCare or the 
administration of the VA?
    Look at what federal control brought to our education 
system through No Child Left Behind. We are moving this week to 
fix that mistake. It is my hope we will stop this rule before 
it becomes yet another mistake in overreach by the Federal 
Government.
    Finally, I would like to reiterate my support for the 
individual financial advisors who would be impacted by this 
rule. I know the overwhelming majority of them have always 
acted in their clients' best interests, and do not need the 
Department of Labor to tell them what to do. If they are bad 
actors, let's ensure they face the stiffest appropriate 
penalties. We must allow the rest to continue their work, 
helping Americans save for their life goals.
    My question, Mr. Gaudreau--I am the sponsor of the 
legislation to make clear that employees can transfer qualified 
money into a simple IRA account, believing that employees who 
participate in retirement plans should have choices and 
flexibility in moving their funds.
    If the DOL rule limits access to professional advisors, 
what are some of the poor choices they might make, including 
taking taxable distributions subject to early withdrawal 
penalties?
    Mr. Gaudreau. I think those are two of the biggest 
problems. What we find without the access to appropriate 
qualified advice, people might rely on friends, their neighbor, 
the chef at their local restaurant, the plumber, cousin Billy 
or somebody else, to get advice on what they should do with 
that rollover.
    Of course, there is a lot of chatter and noise in the news 
media, a lot of disagreement. If you watch anything on 
television any Saturday morning, you will see experts 
disagreeing almost entirely on different investment things.
    It is very, very important. I think consumers are confused. 
They need somebody they trust, somebody in their community that 
they can count on to have their best interests and give them 
advice.
    You mentioned two very particular things, which is people 
taking money out of a qualified plan and depending upon the 
timing and the constructive receipt, having to pay both a 
penalty as well as taxes on those funds. Simple financial 
advice could have recommended them to do otherwise.
    Ms. Foxx. Thank you very much. Mr. Campbell, what are your 
thoughts on the methodology the Department of Labor has used to 
calculate its numbers on the purported benefits of this rule, 
beyond those macro numbers, do you believe there are any 
benefits of the current system that their methodology ignores?
    In other words, could this rule reduce the amount 
individuals were able to save by retirement through lost 
growth, poor risk allocations, or other factors?
    Mr. Campbell. I think that is an excellent question because 
it goes to one of the key problems, I think, with the proposal. 
I mentioned in my opening statement the $100 billion per year 
that the Department previously estimated just in 2011, so the 
same administration, is estimated lost due to lack of access to 
advice. That number somehow has never made its way into this 
proposal. They have never put together what they said in 2011 
versus what they are saying this year.
    Also, in the academic studies they relied on to come up 
with the $17 billion, there is a range, but $17 to $40 billion 
worth of conflicts, that looked at a very narrow type of 
transaction with a particular type of advisor, and did not take 
into account virtually anything else that goes on in that 
advice relationship.
    For example, if I am sitting down with my advisor, one of 
the things I am hoping that they are convincing me to do is 
save more, and if I can save one percent more than I am now, 
that is going to be a massive amount of increase in my 
retirement readiness and savings. None of that benefit is 
calculated in the DOL economic analysis.
    Lastly, I would say the cost that they estimate otherwise 
for compliance is laughable. We are obviously helping many 
clients at my firm start to comply, think about how to comply, 
look at the rule, what would it mean.
    They have already incurred much more in legal fees than DOL 
thinks they would over the entirety of this process. That is 
just the reality of those compliance costs as opposed to DOL's 
numbers on what they think it would be.
    Ms. Foxx. Thank you very much. I yield back, Mr. Chairman.
    Chairman Roe. I thank the gentlelady for yielding, and now 
I will yield to the Ranking Member, Mr. Scott, for five 
minutes.
    Mr. Scott. Thank you, Mr. Chairman. I thank you for 
convening this hearing. Ms. Mohrman-Gillis, we know that the 
rule has been subject to a very long and deliberate process. 
The Secretary has said he is going to make changes based on the 
input he has received. What is wrong with waiting until the 
rule is actually promulgated?
    Ms. Mohrman-Gillis. Thank you for that question. Nothing is 
wrong with waiting. In fact, that is what we think should be 
done. The DOL has spent over five years working on this rule 
with an extensive, robust, open comment period.
    The DOL has been very receptive to comments from us and 
other stakeholders and has stated publicly that it plans to 
refine the rule based upon the comments that it has received 
and make changes that will address specifically many of the 
issues raised by members on this subcommittee and others in 
Congress.
    We believe that it is well past time for the DOL, the 
agency in charge of actually effectuating Congress' original 
intent in 1974, to provide fiduciary level advice to tax 
preferred retirement assets, to allow the DOL as the expert 
agency to promulgate a final rule, and then take a look at it 
and see if you think there are issues or problems with the 
rule.
    Mr. Scott. You have suggested in your comments that we are 
talking about retirement funds. This committee does not have 
jurisdiction over normal transactions, commercial transactions, 
it is the Securities and Exchange Commission, and another 
committee has that.
    We are talking about retirement funds. Should there be 
different protections for retirement funds than there would be 
for other transactions?
    Ms. Mohrman-Gillis. Congress in its wisdom in 1974 set 
standards and protections for tax preferred retirement funds in 
ERISA. That is what this is all about. The DOL is attempting to 
update a rule to actually effectuate congressional intent.
    Its authority is very different from the authority of the 
SEC, and under a completely different set of statutes that 
regulate the securities industry.
    The DOL is acting within its authority and is acting to 
implement Congress' intent to correct what is now a 
marketplace--a problem with the marketplace.
    Folks are talking about bad actors, and the bottom line is 
it is not the advisors necessarily that are the problem. It is 
a structural problem in the marketplace where we allow, 
specifically allow compensation incentives that allow advisors 
to make recommendations and incentivize advisors to make 
recommendations that are not in the best interest of the client 
but rather in the best interest of the advisor. That is what 
needs to be corrected with the DOL rule.
    Mr. Scott. Thank you. Mr. Gaudreau, there are some 
unscrupulous advisors out there who frankly just rip off their 
clients and their business model frankly may not even work if 
they were not able to rip off their clients.
    What kind of products do you think need to be available for 
recommendation that are not in the best interests of the 
workers and their pension funds?
    Mr. Gaudreau. We certainly do not believe that the rule 
should pick winners and losers, Congressman. I guess the short 
answer is that there is no right product in every situation for 
every client, and there is no wrong product.
    Annuities are a very important product if implemented in 
the right situation for many, many Americans. Certificates of 
Deposit are.
    Mr. Scott. The question was what would you recommend that 
is not in the best interests of the workers and their pension 
funds.
    Mr. Gaudreau. I am not sure I understand your question.
    Mr. Scott. That is what we are talking about. We are 
talking about the responsibility to recognize the best 
interests of workers and their pension funds. Some people would 
like to recommend things that are not in the best interest of 
the workers.
    The question is what would you want to recommend that is 
not in their best interests? Hopefully, nothing, because you 
have their best interests at heart.
    Mr. Gaudreau. I cannot think of it. We already believe that 
we do engage in the best interests of our clients. We take an 
ethics pledge on their behalf. We look at every situation--
    Mr. Scott. You want to maintain the best interests of your 
clients?
    Mr. Gaudreau. That is correct.
    Mr. Scott. Good. I yield back.
    Chairman Roe. I thank the gentleman for yielding. Mr. 
Walberg, you are recognized.
    Mr. Walberg. Thank you, Mr. Chairman, and to the panel. It 
has come to my attention that in 2014 the Assistant Secretary 
of Labor for Employee Benefits Security Administration was 
quoted saying this, ``Today, you cannot get Congress to pass a 
Mother's Day resolution.''
    I do not know if we are that bad. What we have done is we 
have shifted--this is his statement--we have shifted from the 
way that social change and legal change and financial change is 
accomplished through congressional action to two different 
avenues for making changes, the main one being regulation.
    Mr. Campbell, as a former Assistant Secretary of Labor for 
the Employee Benefit Security Administration, am I wrong to 
think that Congress is responsible for making policy and the 
Department of Labor should return to its proper role as the 
interpreter of the law, not a maker of new law and policy?
    Mr. Campbell. Well, I certainly agree that the Labor 
Department only has the authority that Congress delegates to 
it, and I think on this issue, absolutely, Congress is the 
proper venue to resolve it, because we have talked about the 
different types of regulations, the SEC, the State Insurance 
Commissioners, all these different avenues of regulation apply 
simultaneously.
    When the Department of Labor changes its standard, it can 
conflict with those other standards, as this proposal does with 
the securities laws. Congress is a much better institution to 
holistically look at these issues.
    If I might actually point out one other thing about the 
Labor Department's proposal. I actually believe they are 
exceeding their authority in several respects.
    Mr. Walberg. Is that their broader posture today?
    Mr. Campbell. They believe they have the authority to put 
out the proposal they do. I would argue with that. I think they 
are doing things in this proposal they do not have the 
authority to do.
    For example, Congress affirmatively decided in 1974 when it 
created ERISA to apply the ERISA fiduciary standard to plans, 
to employee benefit plans. The idea being I am a participant in 
the plan, you are making decisions for me, fiduciary of this 
plan, therefore, you must be held accountable for those because 
I do not have input into it.
    Congress did not apply that standard to IRAs. IRAs do not 
have a fiduciary standard applicable under the law. That was an 
affirmative determination Congress made, I believe, because I 
do control my IRA. This ERISA fiduciary standard based on 
protecting me under trust law does not apply to a situation 
where I am actually making my own choices.
    DOL is using that lack of fiduciary authority to justify 
applying fiduciary authority that Congress expressly declined 
to apply. I think that is one example of where this authority 
is being exceeded.
    Mr. Walberg. Thank you. Mr. Gaudreau, Secretary Perez has 
said in testimony before this committee that so-called--his 
term--``robo advisors'' could be used by some individuals as a 
primary source of advice instead of face to face interactions 
with advisors.''
    Do you share this view that online tools can replace face 
to face interactions?
    Mr. Gaudreau. I think for a small segment of the 
marketplace, who are more sophisticated perhaps and may be 
accustomed to making purchases of financial products over the 
Internet, it might work. We believe that the choice to have 
that sort of an arrangement or to deal with the professional 
financial advisor, another human being, should be available to 
the American consumer.
    People tend to get information on the Internet. It is 
usually where they start. They usually finish by making their 
decision based upon the financial advice of another human being 
in a face-to-face relationship based upon rapport and trust.
    Mr. Walberg. Using that or expanding upon that, going back 
to the stressful market events like the August 2015 stock 
market sell off, what would be a better approach that you would 
recommend to your clients in handling this?
    Mr. Gaudreau. We help walk our customers home. We hold 
their hands through those turbulent weeks and months when the 
market is going up and down and they are unsure what to do.
    A few years ago, everybody thought they should sell Apple 
stock. Now, everybody thinks they might buy Apple stock.
    The fact is the consumer left unassisted often buys high 
and sells low. By holding their hand through this process, by 
being there with them, understanding who they are, where they 
live, what they do, and what is important to them and their 
family, we are able to appropriately advise them.
    Mr. Walberg. Especially those, I would assume, that do not 
necessarily have the income and investment capability of those 
more astute people that can buy and can use different 
approaches--this would block them out.
    Mr. Gaudreau. Precisely. The problem with America is not 
that there is too much advice. The problem is that there are 
not enough of our fellow Americans saving enough to provide a 
satisfactory, stable, and secure retirement for themselves. We 
need more people advising more Americans. Anything that we do 
that deters that process is a mistake.
    Mr. Walberg. Thank you. My time has expired. Thank you.
    Chairman Roe. I thank the gentleman for yielding. Mr. 
Pocan, you are recognized.
    Mr. Pocan. Sure. Thank you, Mr. Chairman, and thank you to 
our panel. I guess I come at this in a little bit of an unique 
perspective in that I do not think, like some, this is going to 
bring financial ruin for the entire population of the planet. 
At the same time, I do not think the proposed rule as presented 
will accomplish what it aims to without having some negative 
consequences.
    I think, Mr. Gaudreau, you said about the enhanced standard 
of conduct is generally people support it, it is the details we 
are concerned about.
    Ms. Mohrman-Gillis, you presented at another panel, and you 
were very impressive and I appreciate the comments you had to 
say, specifically about some of the tweaks. I guess that is the 
first question I would like to ask you.
    Some of the technical issues, like timing of signing of 
contracts and the details of disclosure requirements. Just in 
about 60 seconds, what are some of the recommendations you have 
for the Department of Labor that they should tweak from what we 
saw before they present their final rule?
    Ms. Mohrman-Gillis. Thank you. We made quite a number of 
recommendations to the Department of Labor to make tweaks, to 
make the rule more operational across business models, 
including the contract issue, for example.
    We suggested to the Department of Labor that in every 
single financial services relationship there is some sort of 
contract that the client has to sign, an account opening 
agreement. At that point in time, the client can easily sign 
the best interest contract exemption agreement basically where 
the advisor obligates themselves to provide advice in the best 
interest.
    We suggested that any advice that may have been provided 
prior to that time that might have been a recommendation versus 
education should be covered retroactively by the best interest 
contract exemption.
    We suggested streamlining some of the disclosure 
requirements, some of the reporting requirements. We suggested 
adjusting the time frame in terms of the enforcement 
obligations under the rule to make it easier for financial 
services firms and advisors to comply, and a range of other 
things.
    We feel confident based upon what the DOL has said publicly 
that it has taken all of this input very seriously, and is 
working on a final rule that will truly address those issues.
    Mr. Pocan. Thank you. Let's hope those messages are heard, 
because I think that is one of the concerns a lot of people 
have is the final rule is going to be the final rule. We want 
to know that various inputs are heard.
    I want to follow up on Mr. Walberg's question. I have to 
admit that it stuck in my craw that someone was saying, ``go to 
this website,'' and I will not say the website they mentioned, 
but they actually suggested a website, and I went to it. I 
answered eight questions about my willingness to lose money. 
That is all they asked. I was a 5.5 out of 10, so I guess I am 
more of a blackjack player than craps or slot machine player.
    That is not something that most people are going to be able 
to use, as you said, a very small percent of people. My mother, 
we got her an iPad. She thinks it is a device to play Yahtzee.
    Again, a question on that specifically, because I thought 
that was one of the worst answers the Department gave. That is 
not an alternative, so what potentially can we offer to this 
personal advice and service question that is out there to make 
sure that everyone still has access to be able to get that 
personalized advice?
    If I want to retire at 62, if I want to have a second home, 
those are questions that when I did it on the computer, they do 
not answer, and then I called them up, and they still do not 
answer because that is not part of their model. You need to 
have that in place. If you could just address that.
    Ms. Mohrman-Gillis. Sure. Certainly, as certified financial 
planners, we believe that consumers and small businesses across 
the country need financial advice. We fundamentally disagree 
that the DOL rule as written and as we expect it is going to be 
tweaked and modified, will constrain that advice, will prevent 
that advice.
    I think it is really important to continue to understand 
that the DOL rule allows for advisors to provide advice and 
receive commission compensation. The only thing they have to do 
is put in place policies and procedures to mitigate the 
conflicts that are inherent in commission--
    Mr. Pocan. If I can just reclaim because I have about 20 
seconds left. I hope they are hearing you, and I hope they are 
hearing us, because my concern is that if these are not 
addressed and we have a final rule, the fact that they offered 
that website as an answer implicitly suggests that is where 
people will be driven to potentially out of the rule, and to 
me, that is unacceptable.
    I hope they are listening to you and others as we look at 
how to tweak the rule and make it better, especially for low 
income and moderate income investors.
    Thank you, Mr. Chairman. I yield back.
    Chairman Roe. I thank the gentleman for yielding. Mr. 
Guthrie, you are recognized for five minutes.
    Mr. Guthrie. Thank you very much. I hope the comments are 
listened to, reacted to. I just have to be honest. I have been 
working on this for a while. There are certain things 
specifically that I was able to work with the Secretary and 
Department of Labor on, and they did listen and they did react. 
I have to say that first before I get into my questions because 
that was a positive experience and I really appreciated that.
    However, there are still concerns moving forward. Dr. Foxx 
talked about hearing a lot from her District, and I have had a 
lot of people come to me that are in the industry. Also, I hear 
more from people about Dodd-Frank and the financial service 
than any other issue going forward, and it gets to you. You do 
things here and you pass them out, and they sound simple, and 
you can walk through it on a piece of paper and it makes sense, 
but you have all these people, particularly in the Second 
District of Kentucky, and small banks, just trying to react, 
trying to figure out how to make this work. It sounds so simple 
when you are talking about it here, but it is so difficult when 
you have lawyers say well, it could be interpreted this way so 
you better protect yourself this way, that way, or the other.
    My concern here is not just that we can read it and say 
here are the comments, we can react to it, and this is all 
going to work. It is how it is really implemented. I have heard 
people say that the industry is just going to adapt to it and 
figure this out. I will tell you that is happening in Dodd-
Frank, we are losing small banks.
    Mr. Gaudreau, what do you think of that, that comment, the 
industry is going to adapt to it, we are going to make this 
all--
    Mr. Gaudreau. Frankly, anyone who says that could not 
possibly be part of this industry and make such an assertion. 
Discussion around retirement, retirement plans and retirement 
products, and strategies is a core focus for most financial 
advisors in your districts.
    This will decimate the field for us, drive many out of our 
profession, make it difficult to attract new advisors, young 
advisors, particularly in diverse communities, to come into our 
profession, and thus dramatically reduce access for moderate 
income Americans to qualified financial advice, the very people 
who need it the most.
    The affluent and their advisors who pay fees for service, 
family CFOs and all this stuff, they will adapt fine. They 
always do. The middle-income American will not have access to 
financial advice, and in the long reaches of time, when we look 
back to those people who are left in the shadows, how do we 
care for them? A government of finite resources, how will we 
care for them?
    We need to encourage them to take charge of their own 
retirement security, and it is personal financial advisors that 
do that.
    Mr. Guthrie. Another thing, the proposal as drafted has 
eight months, it will be implemented in eight months. What 
about that time frame?
    Mr. Gaudreau. It is absolutely unworkable. Instead of 
adapting, what is going to happen is major financial 
institutions are going to restrict their advisors from being 
able to engage in new client relationships unless those 
accounts are large enough to essentially cover this cascading 
fiduciary liability that is going to broker-dealers, insurance 
companies, banks, and other providers of financial products.
    They are going to just stop, I think, and say ``let's just 
figure out the strategic issues here involved so we do not 
incur all kinds of fiduciary liability as institutions 
ourselves.'' That means even if we wanted to do pro-bono work, 
we might not be able to do that.
    Mr. Guthrie. Ms. Doba, setting up a small business 
retirement plan, could you discuss some of the practice 
challenges you are facing when you go through setting up a plan 
for a small business?
    Ms. Doba. Well, when I went through it--
    Mr. Guthrie. How did your advisor help you, I guess is the 
question I am getting at.
    Ms. Doba. As I kind of alluded to earlier, when I was 
starting a company and going through all that, and especially 
as an engineer, we have a lot of regulations. I am a woman-
owned firm. I am a disadvantaged business enterprise. I have 
all kinds of certifications and enough requirements that I have 
to fill out on a daily basis. I do not do engineering anymore, 
by the way, I push papers.
    I found that you are so busy dealing with all of that and 
you are stressed out mentally, financially, time wise, that if 
it were not for an advisor, I was just going to push off and 
probably not do a 401(k), had I not had a trusted advisor that 
I could speak to and trust that he could field and deal with a 
lot of my non-responsiveness on matters because I had urgent 
issues to handle, it would not have happened, frankly.
    Now that I am in the position I am in, I am very fortunate 
that I had that advice, and so are my employees because while 
we are a diverse company, most of our employees are 
millennials. With every generation, we need to be saving money. 
This rule is going to discourage some of them, I guarantee that 
they would have not, had there been more hurdles to go through, 
participated in our plan. We may not have had a plan.
    Mr. Guthrie. Thanks. Before I get to my last question, I 
will probably get gaveled down. I would just emphasize, I know 
the comment period is going forward, and I know the experience 
I have had with the Department of Labor moving forward does 
make this very workable.
    I am not going to get my question in, but thank you so 
much, and I appreciate it. I yield back.
    Chairman Roe. I thank the gentleman for yielding. Mr. 
Sablan, you are recognized for five minutes.
    Mr. Sablan. Thank you very much, Mr. Chairman. Thank you 
for holding this hearing. Ms. Gillis, good morning. Consumers 
right now go out and face the marketplace. Here in the 48 
states, there are many advisors, many individuals who are 
licensed and authorized to provide advice and to manage money, 
but where I come from, besides the banks, I think there is only 
one. We have a limited number of individuals who do provide 
advice or who handle money.
    Still, you testified and your written testimony stated that 
consumers in the marketplace sometimes have difficulty in 
distinguishing the advisors, those who provide fiduciary advice 
and those who do not.
    Let me just make an example, you come to this committee 
expecting to testify and to tell the truth. The committee still 
requires you to raise your right hand and make that oath. Is 
this not what the DOL is proposing to do, while we trust you, I 
trust you as an advisor, I still want to verify, you know, some 
famous president made the trust, verify, why are people 
objecting to this when we are requiring an advisor would sign 
with his signature on a piece of paper and say I will provide 
you with--serve your best interests as a consumer.
    Ms. Mohrman-Gillis. I think that is an excellent question. 
Witness after witness testified before the Department of Labor 
that they believed in the best interest standard, and yet when 
they were asked by Labor officials whether or not they would 
obligate themselves in a written contract to provide best 
interest service, witness after witness said no.
    It sort of defies credibility, and I keep wondering why 
opponents to this rule are spending millions and millions of 
dollars with armies of lawyers and public relations 
specialists--
    Mr. Sablan. At least some of them, yes.
    Ms. Mohrman-Gillis. With commercials, arguing against this, 
if they really do agree with and want to comply with--
    Mr. Sablan. I do not mean to interrupt, but they are saying 
they will do so but they will not sign the piece of paper?
    Ms. Mohrman-Gillis. Correct.
    Mr. Sablan. That requires them to do so.
    Ms. Mohrman-Gillis. Correct.
    Mr. Sablan. I am from the islands, so I do not know too 
much about money. Why will they not put their name on a piece 
of paper that they say they do anyway?
    Ms. Mohrman-Gillis. Well, I think that is the fundamental 
problem here. The Department of Labor basically has a common 
sense rule to update its definition of ``fiduciary'' to 
essentially have an enforceable obligation to provide advice in 
the best interest of the client, and that is what is at issue 
here.
    It is being strenuously oppoposed by industry 
organizations. Our experience over eight years of basically 
overseeing a fiduciary obligation of CFP professionals says 
that it will not diminish services, it can be done, it can be 
done under the types of requirements that are very simple 
requirements in the Department of Labor rule.
    Mr. Sablan. To be clear on this confusion, my confusion 
actually. I am probably Billy Joel. I do not know how to handle 
money. My wife does.
    Ms. Mohrman-Gillis. And most consumers do not know.
    Mr. Sablan. They have a choice between what they call 
wealth managers, I think, in banks.
    Ms. Mohrman-Gillis. Right.
    Mr. Sablan. Or this one individual who I personally know, I 
will still require him to sign a piece of paper that tells me 
he serves in my best interest, and he is someone I know.
    Ms. Mohrman-Gillis. Consumers today in today's marketplace 
have no ability to determine whether or not their advisor is 
required by law to be a fiduciary or not. We have a fragmented 
regulatory structure that allows people to call themselves 
``advisors,'' and one group of advisors is only required to 
provide advice that is suitable and can provide advice 
essentially that is in their own best interest as opposed to 
the client's best interest.
    Mr. Sablan. They are simple.
    Ms. Mohrman-Gillis. And another that is required. What the 
DOL is saying essentially is that for tax preferred retirement 
savings, we need to really enforce what Congress put in place 
in 1974, which said for these savings, we need to have 
fiduciary level advice.
    Mr. Campbell. May I reply?
    Chairman Roe. The gentleman's time has expired. Mr. Carter, 
you are recognized for five minutes.
    Mr. Carter. Thank you, Mr. Chairman. Mr. Campbell, do you 
want to respond? Go ahead.
    Mr. Campbell. If I may, I think there was some 
mischaracterization of what actually occurred at those 
hearings, at which I also testified.
    Witness after witness was not saying no, we will not sign a 
paper that says we will act in the best interest of our 
clients. They were all prepared to do that.
    What they were saying is we will not sign this best 
interest contract exemption as proposed, which offers unlimited 
class action liability in states under state contract law, 
which is an issue no one has ever introduced in this space 
before and has an unknown amount of liability and risk 
associated with it, that will make disclosures that no one can 
currently make.
    They do not gather the data in a way yet to make 
disclosures as required by that exemption, and cannot do it in 
eight months.
    There is a big difference between saying yes, we will abide 
by your best interest, and we will sign a document to do that. 
The debate is: what does the document say, what are the 
obligations that go along with it?
    I think it is very over simplified to suggest that all the 
Department is doing is saying you should act in your best 
interest. Quite the opposite. The Department is laying down 
very specific onerous difficult to comply with requirements 
that do not mesh necessarily with your best interest.
    Mr. Carter. Right. Thank you, Mr. Campbell. Ms. Doba, you 
are a small business owner. I am a small business owner, too. 
In fact, five days ago, I am proud to announce, that we started 
our 28th year in business, started that business when I was 
five-years-old. It is amazing.
    Nevertheless, the point I want to make is the relationships 
between my employees, I have had employees who have been with 
me the whole time, and they are like family to me, very 
important. I want to take care of them. I want to take care of 
their retirement. When they leave my business, when they decide 
to retire, I want them to leave with a nest egg and be able to 
say I am sure glad I worked there, that gave me the cushion, 
the nest egg, that I needed for my retirement.
    When I set up that retirement account, when I set up that 
401(k), it was simple. Just went and set it up with someone I 
knew, I was associated with, and they took care of it.
    If these new rules were in effect now, would you find that 
more difficult today to set up a plan such as this?
    Ms. Doba. Absolutely. As I stated before, I probably would 
not have set one up if these rules were in place at the time. 
It is a family. It really is a family. I have to tell you, I 
share with my employees about our benefits, what is coming up 
in policy, changes that may affect us as a company, and our 
employees even have stated their concern about this rule.
    I think it is very concerning, like I said. Your first 
question, where you were talking about--I apologize--at the 
very beginning.
    Mr. Carter. I just want to know how difficult it is if 
these rules were in effect, and you have answered it.
    Ms. Doba. Yes.
    Mr. Carter. To set up this plan. I think this would without 
question deter our small businesses--
    Ms. Doba. Yes.
    Mr. Carter. From setting up plans like this that are so 
essential to us. Ms. Mohrman-Gillis, out of all due respect, 
you say well, if you had a contract, that would make all the 
difference in the world. Would it really make a lot of 
difference in the world? Someone who wants to be a bad actor is 
going to be a bad actor. That is going to happen.
    I can tell you throughout the 28 years that we have this 
retirement plan in my business, I have taken risks in it, and I 
have lost some, but I have also gained quite a bit. I 
understand that.
    I do not see where signing a contract is going to make that 
big of a difference. In fact, I do not see where it is going to 
make any difference at all except to deter people, deter 
businesses from wanting to start these programs, so I beg to 
differ with you on that.
    Ms. Mohrman-Gillis. If I might respond.
    Mr. Carter. You may.
    Ms. Mohrman-Gillis. I think signing a contract is really to 
ensure that financial services firms who say they agree with 
the best interest standard actually put in place policies and 
procedures that stand behind that best interest standard.
    Right now, we have a structure that allows firms to create 
compensation incentives for their advisors that basically 
prompt advisors to sell products or to provide services that 
are not in the best interest of the client but rather that are 
in the best interest of the advisors. So, it is more of a way 
to make sure that obligation--
    Mr. Carter. I understand. My time is running out so I want 
to be quick. Mr. Gaudreau, you sell retirement plans to small 
businesses. What do you think?
    Mr. Gaudreau. If it was just a piece of paper saying we 
will work in the best interest of our clients, we would not 
even be here today. It is the details. This imposes a very, 
very large rubric of additional regulation that will be very 
costly, time consuming, resource intensive for advisors, and it 
is going to make it impossible for them to deal with small 
businesses and small and middle income investors.
    Mr. Carter. Do you think for small businesses, it is going 
to deter them from offering these programs?
    Mr. Gaudreau. Absolutely, to be the catalyst for the 
beginning--
    Mr. Carter. Thank you, Mr. Chairman.
    Chairman Roe. Ms. Bonamici, you are recognized for five 
minutes.
    Ms. Bonamici. Thank you very much, Mr. Chairman. First, I 
want to thank you all of you for being here today.
    I want to follow up on Mr. Scott's question. There has been 
a lot of discussion about this rule in the subcommittee today 
and really over the past several months.
    As we know, there was a rule that was proposed in April, 
numerous requests came in to extend the comment period. That 
was done, and then after the extended comment period, there 
were four days of public hearings with an additional comment 
period.
    And then a few months ago Secretary Perez testified before 
our committee, along with a panel from the industry. Secretary 
Perez expressed his openness to addressing the concerns that 
were raised. In fact, Mr. Guthrie acknowledged that the 
Department of Labor has been receptive about input. I am a 
little bit concerned because most of the testimony today sounds 
like it is based on the rule that was proposed in April, which 
I do not think anybody is saying will be the final rule.
    I really want to get that out in the front. This is a 
critical issue. It reminds me I have a consumer protection 
background. I used to do consumer protection work at the 
Federal Trade Commission. It reminds me of some of the issues 
that I have been through over the years, for example, in the 
mortgage industry, when consumers would trust their mortgage 
broker. There is a disparity of knowledge and bargaining power, 
and they would trust they were getting the best advice 
possible. As we know, that did not happen in that industry.
    I have met with families and individuals across Oregon, the 
state I am honored to represent, a district there. People are 
struggling to get ahead. Retirement security is a big issue. I 
know the sacrifice that is involved in every dollar they set 
aside to contribute to their future retirement.
    My parents are in their late 80s. I am going through this 
personally.
    The retirement landscape has dramatically changed in the 
last 40 years. When the initial fiduciary rule was implemented, 
a majority of retirement assets were in defined benefit plans, 
employer based 401(k)s did not exist, and IRAs were just 
created. We are really in a different world now.
    Ms. Mohrman-Gillis, now that consumers have more 
responsibility than ever, and it seems like less education 
about personal finances, and I have been a long-time advocate 
for more personal financial education, it makes sense providing 
products that are in the best interest should always be a top 
priority.
    In a hearing this committee held on this rule last summer, 
all of the panelists agreed that consumers should receive 
advice that is in their best interest.
    Here is the question I ask the industry panel: ``Just to be 
clear, does everyone agree that the best interest standard 
means a best interest fiduciary standard?'' One industry person 
said yes, and the others nodded affirmatively, and bad me did 
not get them to answer orally. They all nodded affirmatively.
    Can you please speak about why there might be opposition 
when it seems like the industry agrees they should be doing 
this, they should be acting in the best interest fiduciary 
standard.
    Can you address that issue and why do you think there is so 
much opposition, and talk a little bit about what you are 
expecting to see later on when the final rule is actually 
proposed. There is a lot of speculation going on here today.
    Ms. Mohrman-Gillis. There is a lot of speculation. I think 
we come to the table with experience of working under a 
fiduciary standard that is very similar to the BIC exemption 
requirements that are in the proposed DOL rule.
    We have full confidence that based on everything that DOL 
has said, it has taken all the input and is going to come out 
with a more streamlined rule, one that is going to be more 
applicable across business models.
    In terms of the best interest standard, that is an 
excellent question because I do think it means different things 
to different people. The principles that were discussed today 
and are a part of this hearing really fail to meet the true 
best interest standard in at least two ways.
    Number one, the best interest standard does not include the 
component that the best interest of the customer without regard 
to the financial or other interest of the advisor. That is not 
included in the principles. Also, the principles talk about 
disclosure, disclosure alone is not a best interest standard. 
You need to disclose conflicts of interest but you also need to 
either eliminate them or manage them in a way to mitigate the 
conflicts of interest.
    Those two components are part of the Department of Labor 
rule, part of our code of professional conduct, part of what we 
have been doing for the past eight years, and I can tell you 
based on our experience that it is workable and that as you 
made the point----
    Ms. Bonamici. I do not mean to cut you off. My time is 
about to expire. I just want to make this point, which is the 
same point I made in the hearing earlier this summer. I just 
came from the Science Committee, which is why I was not here 
for your testimony, but I did read your testimony.
    When industry agrees and we all have the same goal, this is 
not rocket science, we should be able to work this out, and I 
really get the sense that the Secretary is listening, the 
Department of Labor is listening to the concerns that have been 
raised, we should be able to get this worked out in a way that 
as you said, Ms. Mohrman-Gillis, what has worked in your 
industry, it should be able to be done, and I have confidence 
it will.
    Thank you, and I yield back the balance.
    Chairman Roe. Thank the gentlelady for yielding. Mr. Allen, 
you are next, five minutes.
    Mr. Allen. Thank you, Mr. Chairman, and thank you for this 
hearing. Thank you for testifying.
    This is obviously an important hearing because we have a 
huge disconnect that is obvious here between Government and 
private industry, and how you deal with certain issues.
    I am from a small business community, so I think I should 
probably disclose that. I did start, in our company, a 401(k) 
plan and encouraged our employees to participate. I am proud to 
say our company has been able to maximize its contribution to 
that plan for 42 years, except for one year.
    I will tell you after participating in these hearings, I 
did give some investment advice to my employees back in 2008, 
which I wonder if, Ms. Doba, you might comment, do you ever 
have your folks come in and ask you maybe what we should do.
    Our folks basically said do we stay in or get out, because 
the market dropped substantially. Of course, I got the best 
investment advice that I knew to get, and I said they all say 
it is going to come back, I think we need to hang in there and 
see what happens.
    I wonder what my liability would be as a small business 
owner just having conversations with our folks. Every year, 
things had gone very well and then all of a sudden, they are 
losing huge amounts of money, and they are very concerned about 
it. That will tell you a little bit about the risk that you 
have as far as being a financial advisor.
    What I see here, and Secretary Campbell, the one thing that 
I do not quite understand is there is this disconnect. In your 
opinion, has the Secretary of Labor consulted the investment 
industry about this problem and said how do we solve this the 
right way?
    Mr. Campbell. Well, I am not sure exactly how much he 
reached out to them versus them coming to him. In any event, 
there have certainly been a large number of discussions and 
there has been a comment period.
    The problem we have is that says nothing about what changes 
DOL will actually adopt, whether it actually agrees with the 
concerns that the industry has laid out, and what the final 
rule might look like.
    We had a comment period, and it was extended, and we had 
some public hearings. There were lots of comments made, but 
whether the comment period is 90 days or 140 days, it is one 
comment period on this same thing. We have no idea how DOL is 
going to resolve at least 40 or 50 major issues, and we have 
not gotten into even half of those today.
    The scope of this rule that the Department has proposed is 
so far beyond anything this portion of the Labor Department has 
proposed in the past, that it really is an unimaginably 
difficult task for them to go through the process, hear those 
comments, come out with a rule, and do it on the time frame 
they are looking at, which is essentially an one year time 
frame, to go from proposal to final.
    Mr. Allen. You have worked in the Government sector and now 
you are an attorney?
    Mr. Campbell. Yes, sir.
    Mr. Allen. You have seen both sides of it. Why do we hear 
from you and then we hear from Ms. Mohrman-Gillis about well, 
this is no big deal, this is just something the industry is 
going to adapt to, and then we are hearing from the 
professionals that my goodness, this could turn the whole thing 
upside down, I mean what is going on here?
    Mr. Campbell. I think it is a couple of things. One, you 
have the DOL proposal out there, so folks who want to see 
change in this area naturally gravitate towards the proposal 
despite its warts.
    Those of us who are looking at how we want to actually 
comply in the real world with this, and this was a discussion I 
had with the Department when I testified at the administrative 
hearings, their intentions, their ideas, their themes, are one 
thing, but we have to actually comply with the letter of the 
law, with the regulation as it is written. As it was written in 
the proposal, we cannot figure out how to comply with it. It 
has too many technical problems.
    I think part of the disconnect is Ms. Mohrman-Gillis has 
been saying we have been able to adhere to a fiduciary 
standard, why not the rest of you, my point is what DOL 
proposed is not the same fiduciary standard you adhere to. It 
is much beyond that with many other problems, and how those 
technical issues are resolved is really the crux of this, the 
details matter.
    Mr. Allen. That is what we are hearing. Ms. Doba, when you 
picked your investment advisor, did you just pick him out of 
the Yellow Pages and call him up and say hey, can you help me 
with my 401(k) plan, or did you do a little checking on him as 
far as experience and success as far as dealing with those 
types of issues?
    Ms. Doba. I did checking on him, but he is also, like many 
small businesses, a family friend. When I have asked him 
advice, he is very cautious about what advice he will give. He 
will help guide me in me determining my risk assessments, but 
will not tell me you need to be in this particular fund. He 
will be like here is what is available to you out there.
    I have asked him about should I be in a ROTH or a 
traditional 401(k). He will not give me that answer. He is like 
it is up to you, let's assess your risk.
    Mr. Allen. He may not--
    Chairman Roe. The gentleman's time has expired.
    Mr. Allen. I yield back.
    Chairman Roe. Mr. Messer, you are recognized for five 
minutes.
    Mr. Messer. Thank you, Mr. Chairman. You know, throughout 
this debate, I made the point that in life and in public 
policy, we are not only accountable for our intentions, we are 
also accountable for your results.
    In this debate, we all want to see investors get good, 
sound advice. The real debate here is about what will the 
consequences, the results of these decisions be, and if we 
bring forward policies that actually end up hurting the very 
people that we are saying we are trying to protect, that does 
not make sense for anybody.
    Ms. Doba, I appreciate having a good common sense Hoosier 
here, and appreciate your testimony already about what you 
believe the results of the fiduciary rule as put forward would 
be for your business if it did not change.
    I thought one of the strong insights of your testimony was 
the fact that as a small business owner, you are a consumer 
every day.
    Ms. Doba. Yes.
    Mr. Messer. That you have to discern between selling and 
advice in all kinds of areas, including investment advice. 
Could you just expand a little bit upon why you believe that 
some of the fiduciary rule exceptions that would apply to 
businesses, apply to larger businesses ought to apply to 
smaller businesses as well?
    Ms. Doba. Very good question. That is where one of my big 
crux is with this, why is a small business being the one that 
is affected by this so severely. I actually take exception to 
the fact that it is assuming that as a small business, I am not 
as sophisticated as large businesses, when in fact, I feel like 
a small business has a much better relationship with its 
employees. I am much impacted by how well they are benefitting, 
their livelihood, their family life is going. There is not that 
cushion as much as a large business has.
    I think we can all recognize the fact that large businesses 
have not always been successful themselves either, if you watch 
the news.
    As a small business, I just am really struggling, and I 
still have not been able to get a straightforward answer as to 
why small businesses are being so targeted and affected by 
this.
    Mr. Messer. Why do you need to be protected from yourself? 
I appreciate your testimony.
    Ms. Mohrman-Gillis, let me ask you a slightly different 
question. You represent a broad cross section of CFPs, right? 
Financial planners. I just wanted to ask you, you mentioned you 
believe industry would adapt. Do the folks you represent have--
what are their account minimums for--
    Ms. Mohrman-Gillis. CFP professionals that serve clients 
all across the board. Many serve very small and middle class 
clients.
    Mr. Messer. What would be the minimum?
    Ms. Mohrman-Gillis. We have thousands of CFP professionals 
across the country who have either no or very low minimum 
assets under management----
    Mr. Messer. Let me ask you, do you believe----
    Ms. Mohrman-Gillis. Or provide commission based services.
    Mr. Messer. Thank you. Do you believe under this rule that 
some of their account minimums might go up if the fiduciary 
rule is put forward?
    Ms. Mohrman-Gillis. We believe that under this rule, not 
only believe, but we know based upon our experience with CFP 
professionals who are already operating under BIC like 
requirements, that they are providing services on a commission 
basis----
    Mr. Messer. Do you believe--I am asking you a specific 
question--that their account minimums might go up under this 
rule? That some of the folks you represent might raise the 
account minimum of who they are willing to serve?
    Ms. Mohrman-Gillis. We have Ray Ferrara who testified 
before the DOL. He is going to continue----
    Mr. Messer. I take that to be no. It is a very simple 
question. Do you think their account minimums will go up or 
not?
    Ms. Mohrman-Gillis. He basically said he is not--if he has 
increased costs to put in place any of the requirements for the 
DOL rule, he does not intend to pass those along to his 
clients. The answer is no, not necessarily, that----
    Mr. Messer. Thank you. Reclaiming my time, Mr. Gaudreau, 
what do you think? Will account minimums go up again, 
essentially the clientele that individuals are able to serve 
will shift upward under this rule?
    Mr. Gaudreau. Absolutely.
    Mr. Messer. Could you in your answer expand on where that 
has already happened in the real world?
    Mr. Gaudreau. It is already happening in the real world 
because right now broker-dealers, insurance companies, banks, 
and a variety of other financial institutions, sort of 
manufacturers of products, are already considering their own 
cascading fiduciary liability, and the cost this will pass 
along to them, the liability passed along to them. That is 
forcing them to say you know, small accounts, it is just not 
worth the institutional risk that we will have. It is the same 
thing for their advisors.
    The fact is the typical financial planner who is fee for 
service will charge $1,000 to $2,500 before they will talk to 
somebody period. The regular middle class American is not going 
to write out a check to start talking about their finances.
    We are a catalyst typically for businesses like Ms. Doba's 
to buy financial products as well as pension plans and benefits 
for their businesses.
    If you provide us a way to make it possible to do so----
    Mr. Messer. In reclaiming my time----
    Chairman Roe. The gentleman's time has expired.
    Mr. Messer. I would just make the point--we do not have to 
imagine that, we can look to England and see that it has 
happened there.
    Chairman Roe. I thank the gentleman for yielding. Mr. 
Grothman, you are recognized for five minutes.
    Mr. Grothman. Okay. Mr. Campbell, just give me background 
on this. Did the Small Business Administration analyze the rule 
and provide comments to the Department as to the effect on 
small business?
    Mr. Campbell. It did, actually. The Small Business 
Administration submitted--the Office of the Small Business 
Advocacy at the SBA submitted a comment letter on the formal 
process to the Department of Labor, which is relatively 
unusual, actually, for federal agencies to issue formal comment 
letters to one another.
    They criticized the way the Department had taken into 
account the effect on small businesses in the economic 
analysis, and also provided the results of its own focus groups 
talking to advisors and small business owners about what they 
expected this would result in, and the results of that is they 
expected their prices to go up and their access to investment 
advice to go down.
    Mr. Grothman. Okay, but apparently ignored so far.
    Mr. Campbell. Again, that is part of the comment process. 
We do not know yet how the Department is going to respond. We 
have no more bites at the apple the way it currently sits. DOL 
will come out with a final rule which we will see for the first 
time and have to live with the first time we see it.
    Mr. Grothman. Okay. A few months ago, Secretary Perez was 
before this subcommittee, and he expressed concern about so-
called ``hidden fees'' as the reason for the proposed rule. 
Could you describe what he meant by those hidden fees? Can you 
take a shot?
    Mr. Campbell. I am not entirely sure what he meant by 
those. With respect to the 401(k) plans, the ERISA plans, there 
is already very clear fee disclosure required by DOL 
regulations that we actually initiated while I was running the 
agency, disclosures from service providers to plans and 
disclosures from plans to participants.
    There are also, of course, a variety of disclosures 
required by other laws that are applicable in the IRA space as 
well, where you have securities law, insurance laws, a variety 
of those disclosures.
    I do not think the problem here is lack of disclosure. In 
fact, I think most people are probably throwing away a lot of 
disclosures they are getting because there is too much to even 
begin to read.
    Mr. Grothman. Okay. I will give you one more question, for 
Ms. Doba. One more time, in this world, there are kind of 
different rules for the small businesses and their employees 
versus a large business. Can you just one more time kind of 
wrap things up by summarizing what the effect of the difference 
between big business and small business will have on small 
business?
    Ms. Doba. Sure, absolutely, I would be happy to. Small 
businesses, like I said earlier, we are already perceived as 
having the inability to provide great benefits to our 
employees. We have that perception.
    A lot of times we have higher costs, we have more 
restrictions. Adding more potential fees coming our way to not 
only ourselves but our employees affects us on hiring. In 
engineering, we already have STEM issues on hiring. That has 
nothing to do with this particular subject, but it is just one 
other hurdle that we have to go through with fees that will 
affect not only myself but our employees, and as a plan 
participant myself.
    Mr. Grothman. Okay. Thanks much.
    Chairman Roe. Mr. Hinojosa, you are recognized for five 
minutes.
    Mr. Hinojosa. Thank you, Chairman Roe, and Ranking Member 
Polis, for holding this important hearing, and I also want to 
thank our panelists for testifying today. I apologize that I 
came in apparently late, but I was at the Financial Services 
Committee, and that went long.
    I want to continue the line of questioning that has 
occurred already. As we continue to debate the Department of 
Labor's fiduciary rule, it is important to note that the 
Department's expected fiduciary rule is necessary, long 
overdue, and will help millions of Americans.
    We must ensure that the principles regarding the DOL's 
proposed fiduciary rule strike a balance in protecting the 
individuals from misleading or possibly harmful advice while 
also promoting robust access to information and personal 
assistance regarding retirement investments.
    My first question is directed to Ms. Mohrman-Gillis. As you 
point out in your testimony, the retirement landscape has 
changed in the past 40 years. It has now more self-directed, 
and 401(k)s are the new normal. If consumers have more 
responsibility than ever before for their own retirement, 
should their best interest always be put first as required by 
the Department of Labor by their rule?
    This seems to make sense to me. Can you please speak to 
that issue?
    Ms. Mohrman-Gillis. Sure, and the answer is absolutely, 
yes. I would also like to say advisors do not have to--
consumers do not have to pay fees in order to get advice under 
the rule. Advisors can still provide commission based advice, 
they just have to do it in the best interest of the client.
    We have heard about the flood gate of litigation. That is 
not our experience as CFP professionals who have been providing 
fiduciary level advice over the last eight years, nor is it the 
experience for the advisors who are providing fiduciary level 
advice. In fact, research shows that for consumers who receive 
fiduciary level advice, there is less likely there is going to 
be litigation.
    A number of folks have mentioned the U.K. situation. That 
is apples to oranges to what the DOL rule is. The U.K. banned 
commissions and put in place competency standards for their 
advisors, and they are still having a favorable outcome to 
that.
    The DOL rule does not ban commissions and does not put in 
place competency standards for advisors.
    Absolutely, to your question, the retirement landscape has 
changed dramatically, and now more than ever consumers need a 
true fiduciary standard of care, particularly for tax preferred 
retirement assets.
    Mr. Hinojosa. Let me ask you a second question. I want to 
ask you about access to advice, because this issue is 
particularly important to me. I remember what happened in 
January of 2008 when we went into a deep financial crisis, and 
how the value of many of the employees' retirement funds took a 
huge drop.
    Ensuring that small savers have access to un-conflicted 
investment advice is of paramount importance to me. Can you 
tell me how a fiduciary duty can increase access to retirement 
investment advice, and can you tell me the benefits from it?
    Ms. Mohrman-Gillis. So, a fiduciary duty as you said will 
increase access to un-conflicted investment advice, which is 
critically important particularly for our small savers. They 
need it more than anything.
    Small savers, the most important decision they generally 
make is whether to roll over a 401(k) into an IRA. They have 
responsibility for that. The rollover market in today's 
marketplace is a $300 billion a year market. It defies 
credibility to think that firms and advisors will walk away 
from a $300 billion a year rollover market just because they 
are obligated to provide advice in the best interest of the 
retirement saver.
    Mr. Hinojosa. I did not realize that it was so large, $300 
billion a year. What advice would you give us in Congress to be 
able to find some workable compromise so that we can be fair to 
employers?
    Chairman Roe. Hang on to that thought. The gentleman's time 
has expired. I now yield myself five minutes.
    I have listened to this testimony now for hours, and I 
always go back to my medical background, what is the chief 
complaint. What are we trying to fix. Apparently, what we are 
trying to fix is a problem, we roll this money over from a 
401(k) to an IRA, people are getting conflicting advice, and it 
is costing us all this money.
    I looked at that formula that was used to calculate this 
$17 billion. I can make that number any number that you want. 
It was not a basis, in fact. It was a 1 percent yield more in 
people who did not get this advice versus who did. The actual 
number is 0.16 percent. It did not look into the cost of that 
either. The number $17 billion is now going to become the Ten 
Commandments. It is not. It is not a real number.
    I also want to say that Bernie Madoff was a fiduciary also, 
and a crook is a crook. If you have someone who is not looking 
out for the best interest, whether it is a doctor, a lawyer, or 
a financial advisor--Ms. Doba, you paralleled very much what we 
did in our practice. We started with four doctors and 12 
employees. We started with a pension plan with a person we knew 
to come advise us how to do that.
    We have employees that have been with us nearly 40 years 
now who have many, many six figures in their retirement plan 
because of what we had done. We have gotten big enough now we 
can have a fiduciary and do have a fiduciary. We are large 
enough to absorb that cost, and certainly in managed plans.
    Let me give you a little number here and see if these 
people are going to jump forward with all these regulations. 
Let me just get a little of this off my chest.
    When we talk about rules and regulations, I have dealt with 
them for 40 years practicing medicine. The Affordable Care Act 
now has 20,000 pages of rules. We spend more money in medical 
administration now than we do on cancer and heart disease 
treatment in this country. That is how expensive these rules 
are.
    When it is unknown, as the Secretary said, we do not know 
what the costs are. I guarantee you that your client that said 
he was not going to raise any of his fees is going to raise his 
fees or he will go out of business because he has to pass the 
cost on somewhere. I understand that. I totally get that. 
Somebody has to pay the bill for this.
    It is going to be a large bill when you comply with all 
these rules and regulations. Ask a community bank. I walked 
into a community bank the other day in Mountain City, 
Tennessee. There are more compliance officers in that bank 
after Dodd-Frank than there are loan officers. That is 
ridiculous.
    That is my fear here. I think what this is, is a solution 
looking for a problem. Right now, what we have is a plethora of 
people who are saving. We need to go out and find savers and 
encourage people to retire. That is what we did.
    To give you another little number here, the median 
retirement account balance for all working age households is 
$3,000. It is not the $50,000 that you brought up a minute ago. 
Anybody would jump on a $50,000 account, 1 percent of that is 
$500. One percent of $3,000 is $30.
    We have to have lower-income folks. I saw this with people 
I hired every day. I encouraged them. I begged them not to cash 
out like Ms. Doba did their 401(k) and do anything because it 
is very expensive when you look at the cost of money over time.
    Mr. Gaudreau, I want you to walk us through in my last 
little bit of time here about individuals that you have seen, 
companies and individuals, that you have helped with your 
business, obviously almost 100 years old.
    Mr. Gaudreau. Yes. We are part of the fabric of our 
community, like most of our members are across America, and 
probably in your District, too, Mr. Chairman.
    These decisions that consumers make in the financial realm 
are based upon rapport and trust and relationship. These are 
not just simple transactions. We have worked with the DOL, 
tried to work with the DOL, to get this rule right, and there 
are many stakeholders in this discussion, and I think we are 
all better off and better served, including the consumer, if we 
collaborate on a solution that adopts these principles.
    We do not disagree that we should work in the best interest 
of our clients. My family has been doing that for 100 years. As 
a matter of fact, it is a little insulting to imply that we 
ever have not. The fact is that we absolutely agree with that 
and endorse that public policy.
    This is an actual change of such magnitude, by unelected 
regulators, and it is more than just a simple statement of 
trust. It is a giant rubric of regulations that will be imposed 
upon our industry and make it more and more difficult for the 
regular Americans to get financial advice.
    Chairman Roe. I thank you. My time has expired. I want to 
thank you again, the witnesses, all of you. Quite frankly, you 
are all here for the same purpose, which is to try to encourage 
people to save for retirement. That, I applaud all of you for, 
and thank you for taking your time to come and be with us. It 
was excellent. Each of you had great points to make, and I 
appreciate that. Appreciate you testifying before the 
Subcommittee today, each and every one of you.
    Mr. Polis, do you have any closing remarks?
    Mr. Polis. I would like to join the chair in thanking our 
witnesses for spending their morning with us. I think many of 
us agree that a conflict of interest is important to address, 
how to address that is, of course, being discussed. I am 
hopeful we can move forward in a bipartisan and cooperative 
manner.
    As you know, very few Democrats support legislation that 
would kill the rule, and I personally believe that is 
counterproductive. What we are talking about, of course, is 
specifics of the rule or specifics of legislation.
    The Department of Labor does need to make changes and 
communicate with stakeholders to ensure that middle and low 
income individuals can continue to receive high quality, non-
conflicting financial advice.
    What I have learned from my conversations with savers, 
advisors, consumer protection advocates, and constituents, is 
we should continue this productive, open process, which I 
believe the Labor Secretary has been doing, which I also 
believe would be strengthened with an additional comment 
period, as long as it is consistent with the time frame of the 
presidency and the tenure of the Labor Secretary.
    When we disagree about how to solve a problem, we need to 
sit down and hammer out a solution. I hope this hearing today 
is very much seen in that light of furthering the open 
stakeholder process that should complement the efforts of the 
Secretary as we seek to finalize this rule, and I yield back.
    Chairman Roe. I thank the gentleman for yielding. Again, I 
want to offer my appreciation for all of you taking the time. I 
know there is a lot of time and effort in preparing for these 
hearings, and I thank you for doing that. You have been a great 
panel.
    I want to put into the record just the principles that we 
have worked on for this rulemaking.
    Promoting families and individuals' saving for a 
financially secure retirement is an essential public policy 
goal.
    Retirement advisors must serve in their clients' best 
interest and must be required to do so.
    Retirement advisors must deliver clear, simple, and 
relevant disclosure of material conflicts, including 
compensation received, and all investment fees to individual's 
savings or retirement.
    Public policies must protect access to investment advice 
and education for low and middle income workers and retirees.
    Public policy should never deny individuals the financial 
information they need to make informed decisions.
    Investor choice and consumer access to all investment 
services, such as proprietary products, commission based sales, 
and guaranteed lifetime income, should be preserved in a way 
that does not pick winners and losers.
    Small business owners should have access to the financial 
advice and products they need to establish and maintain 
retirement plans and help workers save for retirement.
    I think those are the principles that we need to go forward 
on, and we need to put the brakes on this rule before we end up 
with another mess that we have seen in multiple other things.
    I have seen rulemaking put businesses under, and it was 
never intended to do that from Congress. I have become very, 
very weary when these agencies begin to issue rules that affect 
how we actually do our jobs. I have seen it in medicine. It is 
in the financial services, in banking, and so on.
    Who ultimately pays the bills for those? Us, the consumers. 
We ultimately get the bill.
    Thank you all very much.
    Mr. Polis. Mr. Chairman, I do have several documents to 
submit for the record, along with the testimony that Ms. 
Mohrman-Gillis mentioned in her answer to me, and this document 
as well.
    Chairman Roe. Without objection, so ordered.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Roe. With that, the meeting is adjourned.
    [Additional submissions by Dr. Roe follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    [Whereupon, at 11:58 a.m., the Subcommittee was adjourned.]

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