decree is ordered. how are we as a nation going to keep looking at cleveland to make sure they are following the prescribed reform plan? once the justice department moves out, how are we going to mature 15 years from cleveland, however going to make sure cleveland is following the prescribed reform plan? pittsburgh did, a prescribed reform plan, and we were investigating are stored. i learned that the pittsburgh police department was pretty close to having another investigation. their chief was arrested on corruption charges. that was really shocking to me. pittsburgh was the first city. host: simone weichselbaum i am going to try and get in one less call here. hi, willy. if you could make your question or comment quick. caller: what i don't understand -- we never have been about the

major talk of parents, to respect policemen when police stopped them. i think it is very necessary for us to talk about parents while we talk about police. -- [indiscernible] -- host: willy bringing up what we heard from the last couple of viewers, that there is a societal role here as well. if you want to look at more at the marshall project's work, you can go to the marshallproject.org. you can follow them on twitter. simone weichselbaum is a staff writer for them. thank you for talking to the viewers about your work. appreciate your time this morning. guest: thanks for having me. host: that does it for today's "washington journal." we are going to bring you now to the labor department. they have recently called for new consumer protections.

jeffrey science is a keynote speaker today -- jeffrey zients is a keynote speaker today. he will be talking about regulation of retirement financial advisors. live coverage here on c-span. [captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> [indistinct chatter]

>> [indistinct chatter] >> here on c-span, where i live in washington here the national economic council director jeffrey zients will be the keynote speaker. talking about the recall, a request for new rules designed to rick -- protect workers'

retirement savings. after that, a discussion on some of the future policies and protections they could provide and potential unintended consequences that could result from the new rules. the labor department says the proposed rules a similar to, but more flexible bad, a 2010 proposal that was withdrawn after complaints from wall street institutions. it should get underway shortly. we want to let you know, too, about our road to the white house coverage. hillary clinton campaigning in south carolina. it is columbia, south carolina. she will be speaking at the democratic caucus live here on c-span, 3:00 p.m. eastern. any campaign announcement for rick santorum. this afternoon at 5:00. >> [indistinct chatter]

>> good morning, everyone. i am the senior vice president here at the bipartisan policy center. welcome, all who are here in the audience and those who are watching on c-span or on our webcast. to a discussion that i think will prove to be very lively, but also hopefully informative. a couple of quick administrative issues before we get into it. our keynote speaker, mr. zients, will not be able to take questions, but for the panel that follows mr. zients, those here in the audience, you consummate your questions on cards provided. and those of you who may be watching on television can submit questions online. we are very technically updated here by twitter #bpclive.

or you can e-mail your questions to bipartisaninfo at bipartisan npolicy.org. let us begin. some have dubbed this event the policy throwdown, surrounding the department of labor's judiciary standards. officially, we are much more boringly named. we certainly have champions, and we probably have a few critics represented here today. a little over a year ago, the bipartisan policy center launched the commission on retirement security --

retirement, security, and personal savings. the commission is headed by former senator ted conrad and the former deputy commissioner at the pension benefit guarantee corporation. that commission is made up of some of the most prominent anchors in this country surrounding pensions and savings, and they also include the two public trustees of social security. it is narrowing its final recommendations, which we expect to release -- be released later this fall. but this commission knows that being adequately prepared for once retirement is a function -- once retirement -- one's retirement is a function of those savings. and those functions will be influenced by the advice they receive from their brokers and

advisers and possibly as the cover story highlights this week, a robo-advisor. so we are here to discuss the role that the president asked be updated, to put the best interests of the investor above the financial interests of the advisor. it is a broader objective i think we can all find bipartisan support for, but as always seems to be the case and difficult regulations, some have argued that the unintended consequences of the proposed regulation might actual harm the folks it is expected to help. to help us sort out this, we have a distinguished group of speakers and panelists this morning. without any further ado, let me introduce our keynote speaker, a champion i am sure of the proposed rule, jeffrey zients. mr. zients is director of the national economic council and

assessment -- assistant to the president. after a long and successful career in the private sector, mr. zients was proposed as the first-ever chief financial officer in 2009. he has also served as the deputy director officer, as well as to terms as that offices -- office's director. let the throwdown begin. mr. zients, the stage is yours. jeffrey zients: thank you bill, for that kind introduction. and thanks for having me here today. it is good to be here at the bipartisan policy center. speaking of bipartisan, it was great to see a strong bipartisan vote in favor of trade promotion last week in the senate. we are pleased to see this important piece of business a

step closer to getting done. middle class economics, the idea that the economy does best when it grows from the middle out has animated everything the president has done since he has been in office. this vision is underpinned by the basic premise of america -- if you work hard, and play by the rules, you can get ahead. over the past six plus years the president has addressed challenges to that vision. the near-term challenge of ending the financial crisis, and feeling the recovery, and the longer-term challenge of expanding opportunity for the middle class after decades of stagnant wage growth, increasing health care costs, and reduced access, and a financial system without adequate safeguards. the good news is, the data shows

that under the president possibly to ship, we have made -- the president's leadership, we have made real progress. 12.3 million private sector jobs created across 52 straight months. the longest week of job creation on record. -- streak of job creation on record. the unemployment rate has fallen to 5.4%. the lowest level in seven years. more americans graduating from college than ever before, and the highest high school graduation rate in history. more than 16 million additional americans with health insurance and health care costs growth that is near its lowest level in 50 years. we are now the number one producer in the world of oil and natural gas. the amount of electricity we generate from wind is up three

times, the amount from solar, up 20 times. and we have set historic standards that will double the fuel efficiency of new cars by 2025. all of this progress, while deficits have come down by two thirds, from nearly 10% of the gdp to less than 3%, a level low enough to stabilize debt as a share of the economy. importantly, we are building this economic progress on a more stable financial system, and we have put in place reforms that make it safer and stronger. our largest and most complex financial institutions have doubled their capital cushion to absorb unexpected losses, and are now subject to annual stress test. -- tests. parts of the financial system that escaped adequate oversight before the crisis have been made more transparent and brought

under stronger oversight and supervision. regulators now have the tools to manage the potential future failures. tools that were unavailable when aig and others collapsed. importantly, many of the worst financial products that contribute to the crisis -- contributed to the crisis have been curbed or no longer exist. the president has also been relentless in his efforts to strengthen consumer protection. he thought to create numerous financial protection bureau as a strong and independent watchdog. and the cfpb has enhanced safeguards for mortgages, credit cards, debt collection, and student loans. through enforcement actions, the cfpb has put over $5 billion

back in the pockets of more than 15 million customers. and recently, they took an important step toward cracking down on abusive practices in payday lending. so, we have made significant progress in building a stronger foundation for long-term prosperity, while we have worked our way back from the crisis. but even as we are here today talking about how to move forward with stronger consumer protection some would like us to go backwards. just last week, senator shelby pushed to the committee a partisan bill to roll back wall street reform. his goal here is clear. to weaken oversight of some of the largest financial institutions and to tie the financial watchdogs in knots. we have seen this movie before with the lax rules and weak supervision before the crisis

and all the damage that it caused. the president has been very clear -- no sequels here. the president will not accept any legislation that unravels wall street reform. recently, republicans and congress have also tried to block commonsense rules that protect military service members and their families from predatory lenders. fortunately, their efforts have failed so far. i have a simple message to congress -- let's protect servicemembers and their families from abusive predatory loans. let the rule go forward. now, at the same time, some republicans are trying to roll back reforms, we are going to continue to move for with the president's consumer protection agenda. the conflicts of interest

rulemaking we are here to talk about today is a logical next step. it addresses one of the most important financial issues americans face -- how to plan and save for retirement. the president leaves that after a lifetime of hard work, all americans deserve every opportunity to retire with dignity, and security. that is a central tenet of middle class economics. the financial crisis are based trillions in retirement savings. while the recovery has replenished most of what was lost, middle-class families are still making up ground. unless we do more, millions of americans will have a hard decision to make. two other work well past when they plan to retire -- to either work well past when they retire, or to live with less in retirement risking falling back

to social security alone. social security is, and must remain, a rocksolid guaranteed benefit that americans can rely on. but too many americans don't have enough to supplement their social security. that is why the president has put forward retirement proposals that would give 30 million more american workers access to a new workplace savings opportunity. at the same time that we are working to increase access to savings opportunities, we need to make sure that americans who are doing the responsible thing working hard and putting in enough for retirement, are getting a fair share of their return on their savings. today, as we all know, workers are increasingly responsible for their own retirement, as the economy has moved way from traditional pensions toward 401(k)s and iras.

instead of a defined pension plan managed by a professional with a guaranteed stream of income in retirement, most american workers need to figure out for themselves how to invest and manage the risk of retirement planning. this involves difficult and complex decisions, and that is why so may people turn to investment advisers for help. and when they do, they should be able to trust their investment advisers always have their best interests in mind. just as we all expect our doctors to give us the advice that is best for our health, and lawyers are duty bound to represent their clients faithfully families saving for retirement should be rest assured that their financial advisors are always putting their best interests first. but the current rules of the road don't actually require all

financial advisors to put the clients first. today, unfortunately, too many financial advisors have failed. with high fees and lower returns. you see these conflicts of interest leading to recommendations to roll over existing retirement savings out of low fee plans and into higher cost investments. a council of economic advisers report shows that conflicts of interest cost middle-class families to lose out on an estimated one percentage point of annual returns on their retirement savings. that adds up to $17 billion of lost retirement savings per year. losses of tens of thousands of dollars for many individual families.

it has been almost 40 years since the rules of the road for retirement advice were updated. back then, in the mid-1970's, eight track tapes were all the raise -- rave. and 401(k)s didn't even exist. now, with more than $12 trillion in self-directed savings, good investment advice is absolutely essential. but loopholes in these outdated rules allow some advisors to claim they are putting their customers first while hiding behind confusing fine print and legal fees. that is why secretary perez and the department of labor are taking action through the proposed rule on conflicts of interest. let me be clear. many financial advisors do have

their clients' best interests at heart and provide sound, good advice. those advisors deserve to get fairly compensated for that advice, and the department possible will allow just that -- department's rule will allow just that. we have all heard a lot of stories about how this may -- this may affect retirement savers with small balances. i just don't believe the argument that small savers cannot be served by advice that is in their best interest, especially with the advent of new technology based models. in fact, the rule will help the best advice when out because those already selling good products for giving good advice stand to benefit in a world where a client's best interest has to be first. the president said it best. if your business model rests on

taking advantage of or milking hard-working americans out of their retirement money, then you shouldn't be in business. as i look around this room, i see a lot of familiar faces. and i want to thank everybody who has contributed time and effort to this process. as a result, the proposed rule already reflects a lot of feedback from industry, consumer groups, retirement advocates academics, and the public. this feedback is helped -- has helped the labor department should the role. for example, based on industry feedback, the proposed rule includes streamlined flexible exemptions that accommodate the common types of existing compensation practices.

under one of these exemptions, advisors can sign a death interest contract with their client. the idea is pretty simple. firms can continue to set their own compensation practices, as long as they acknowledge they are -- , signed contracts are from and will always act in their client asked -- client's best interest, and disclose any conflicts that may prevent them from doing so. pretty straightforward. firms will be held accountable if they break that contract. this new approach -- this is a new approach, and we believe it will help protect consumers in a way that is not disruptive to retirement advisors who are already providing good advice and putting their clients' best interests first.

as you all know, the rule is now out for public comment. on top of the feedback we've received over the past five years, we will have a total of more than four months for additional public comment on the proposed rule. clearly, that is more than ample time. any advisor acting in their clients' best interest should support this will make a and work with us -- this rulemaking and work with us to get it right. unfortunately, for some special interests, the only good will would be no rule at all -- rule would be no rule at all. that is not going to happen. when the retirement security of so many americans are at stake. i ask all of you here today -- continue to be a constructive part of the process. providing input to help us

finalize the pool in a way -- rule in a way that best accomplishes our goals. when retirement advisors put their clients first, we believe the best advice and best products truly will win out. that means more competition better advice, better products, and more financial security for every american who works hard and saves responsibly. the conflicts of interests rule is in important step toward in ensuring we have an economy that works for everyone. and everyone who works hard and plays by the rules can get ahead. that is central to middle class economics, and it is central to who we are as a country. i want to thank bill for hosting us today. and thank all of you for helping us get this rule right.

thank you. >> [applause] >> thank you, director zients. it is now my great pleasure to introduce the moderator of our panel. we are honored and extremely fortunate to have floyd nourse moderate this panel. as many of you probably know, he recently retired from being the business editor in chief financial correspondent for the "new york times." he spent 26 years their writing two columns a week. we could not have asked for a better person to help us moderate this issue today. just as a reminder, if you have questions for the panelists jot

them down on cars provided by kelly and caroline over here. i think kelly is back there. we will collect to them as the panel proceeds. and once again, for those of you who are watching, you can submit questions via twitter via # b pclive. mr. nourse:, it is all yours. mr. nourse: thank you, bill. one correction, i was assistant business editor. >> [laughter] mr. nourse: some of them felt i was much more important than i was, and i do not want to indicate a disadvantage. i will introduce the members in just a moment, but i want to point out which -- something that has always struck me before we start. we have never been quite sure in this country whether we want to treat financial salesman the way

we treat other salesman. a car salesman can get in trouble if he lies about the car he is selling you. if he tells it was not in an accident and it was. but if he sells you a car you should not buy because you cannot afford the payments really, or because a different car would much better serve your needs, the salesman is not held responsible for your bad judgment. you are. the question now is whether we need to require that all salesman offering retirement plans be required to keep the interests of the customer of paramount. presumably in the days we just heard about when most of us had defined benefit plans, the companies offering the benefit plans were sophisticated or at least knew enough to hire somebody who was to help them figure it out. but it is not at all clear that

many of the recipients of 401(k)'s will know much of anything about investments. we are going to hear about the extra costs, we are going to hear about whether the new rules require getting rid of hidden fees, as i suspect they will. some of these are likely to appear, as is happening now in banking. is that good or bad? is there really enough of a problem to justify new rules, or are they just a few bad apples who ought to be and can be dealt with under the current rules? we have six people on the panel, all of them are lawyers. directly to my left, he teaches law at the university of mississippi and has extensive experience.

michael hoffman is a former prosecutor in los angeles. he is fourth down, i miss read my left. pamela's senior vice president of fidelity investments, which, as you all know, is one of the largest mutual fund companies in america. i suspect many people in this audience have some money with them. next one is alicia smith. she is a senior counsel for regulatory affairs at the financial services roundtable, an organization of large financial firms. and mr. hoffman. samira is a former official in the obama administration's economic council. if some of you have questions about the rule that you would've like to asked our previous

bigger, you might want to direct them to her. finally, mark smith is a partner and a leading oil -- lawyer in the field. he also represents financial services companies. let me first turn to ms. smith. one of the issues you just heard discussed is the question of whether financial salesman have abused customers, persuading them to move money from more one case -- from 401(k)s to other retirement accounts. is that a problem? ms. smith: i think we need to understand what motivates an individual to want to make a change. in many cases, if you are fortunate enough to be in a company that offers you a retirement savings investment, i gave 401(k) plan, you have asserted any of of investment opportunities and you may

allocate your contributions to those. when you leave the job, you may have the opportunity to stay with that plan, if that plan provides you to stay. if you have a company that you are moving to that has a plan that permits you to roll your money to that plan, you may do so. you may also have an opportunity if you think that is appropriate for you to move into an ira. the aire would be -- ira would be an investment opportunity that allows you greater flexibility. whether that is appropriate for you or not is something that has to be discussed. if you are the financial professional having that conversation, to find out what is motivating them. in some cases, they will not want to stay with their current employer costs -- employer's plan if they are separating from that employer. if they are leaving with a not

so happy expand behind them, maybe they already have several former employers and the want to consolidate their accounts and not have four or five different statements coming in from each of the accounts with a presently have money. but to say that automatically moving over into an ira means that there are higher fees higher costs i think requires a lot more nuanced because it is not always that case. if you're talking about the securities industry, the financial industry regulatory authority -- recently issued reminders of its own rules to broker-dealers. and the fcc does the same thing. and bolton initiated regulatory priorities, in terms of their examinations, to help refocus the industry on what your obligations are. your obligations are not to call people up and persuade them to

move in order to satisfy your own wants. 4mr. norris: do you think there is a problem? ms. smith: i don't think there is a problem on that scale. there are bad actors that can and should be dealt with. and the rules are already there to do so. mr. norris: other members of the panel are welcome to interject at any point. >> i just wanted to comment. i think you are exactly right. there may be some bad actors, but i think for the most part what we are focusing on is what is most important for the average worker. fidelity has 25 million customers. 17 million in 401(k) plans. and what we have seen oftentimes is that when a worker is going to change their job and now there are lots more jobs available, they have very, very

difficult decisions to make. oftentimes, a lot of them have no clue as to their options. in the example, we had a participant who had been in a plan for seven years. had accumulated around $35,000 in their plan. wanted to change jobs. at a great opportunity with a startup. the startup company did not have a 401(k) plan. and this participant wanted to figure out, well, what are my options? it taking this new job, they would have to incur about $50,000 in moving costs. so they called up, not necessarily understanding all the options and said, i'm terminating. i need about $50,000 to move and i want to cash out. we had a conversation with that customer around all of their various options. at the end of the day, we were able to recommend to them that cashing out was not the option.

they obviously had an option to stay in their current plan. the new plan did not have a plan -- the new company did not have a plan. so there was conversations around whether or not a rollover would make sense when a distribution. they were thinking about a cash out being ok, regardless of the income taxes and the penalties. so these conversations are very important to have because if not, i think a lot of workers would and up without adequate retirement savings. >> if i could jump in, we agree that people need advice. but they need advice that is in their best interests. and currently, we are operating under a regime that yeah, this is not just a matter of a few bad actors. this is what is legally permissible under the law. under the current regime, brokers can steer the client

into high-priced, low performing products. and retirement savers luke morton $17 billion as a result. -- lose more than $17 billion as a result. so this needs a broad solution, and that is what the department of labor has proposed to -- proposed. ms. smith: i don't think you are looking at an average case of a broker abusing their client. in fact, if you look at the regulators even though it is called a suitability standard the way it is important is that used a have to put your best -- the best interests of your customer first. if you look on the security side generally, looking at the fcc my understanding from talking to people who have been in the room when decisions were made against

advisers or registered broker-dealers, the use the same measuring stick. it didn't matter to the staff that you are a broker-dealer and your official deal was suitability. they measured with you acted in the best interest of that client. if you look also at what is required for registering and advisor, you don't see the words . but years and years ago, when it was first adopted and the court interpreted the law, it interpreted that there was a judiciary duty. but what it does require is that the advisor recommend suitable investments to its customers. so you see the word suitable. again, focusing on what is in the customers' best interests. and the only way you can know that is to know all the

circumstances around that particular situation. >> and advisor is subject, but a broker-dealer is not. if you're interested in determining whether there are abuses in the industry, you need to go listen to tape conversations that have a number of sellers essentially misrepresenting aire costs -- ira costs. what i don't follow in this debate is why, even if there are no abuses, the industry cannot handle having a best interest standard apply to these recommendations. that is essentially what's the dol is doing, and i have not heard anything from industry panelists consistent with applying that standard which is almost the standard that currently applies to broker-dealers. >> if i can jump in, i have read the court cases that the industry likes to cite.

not that they see the recommendation must be consistent in the client' best interest. in one case, the court said this was agreed his misconduct. these are cases in which many if not most suitability cases according to a broker-dealer handbook. the unsuitable recommendations are accompanied by other violations, including failure to supervise, misrepresentations, and unauthorized trade in. this is from the author upon own survey -- author's own survey. so they have look at them. widespread emperors basic misconduct -- but let's not make believe that it is actually serving clients'

best interests. >mr. norris: you have said that the current rules support a race to the bottom. you have just heard people saying things are fine. there may be a few problems. why do you think they support a race to the bottom currently? >> i think that hearing the panelists discuss all the menu shows involved here, it is a well-documented fact that it is very confusing out there when you are out there as a consumer and trying to figure out who to turn to for financial advice. numerous studies show that people don't understand the standards that are out there. you have a lot of investment professionals who are just trying to do right. they are working in the best interests, just like -- but it is too easy for those responsible professionals to be outcompeted in the marketplace today by people who market themselves as offering low-cost

or free advice when, in fact, they are being paid under the table to scare people to higher cost lower performing investments. and the consumer doesn't know they are being paid by third parties to do this. i think what the department is try to do is make it so that we have a level playing field, and even marketplace where you don't have to -- an even marketplace we don't have to be worried about the minor says. you can trust that the person that you are paying to give you financial advice have to put you first. you won't have that race to the bottom in the marketplace anymore. i met with so many investment professionals in my time at the white house. they are hard-working. they got into this job to help people achieve the american gene. and they help people save for their college, their first home their retirement. we just need rules of the road that are protecting consumers

adequately. that is all these rules are trying to do. >> -- in terms of this best interest standard. you are correct, in terms of what the current standard. fidelity absolutely support a best interest ended. that is what we do today. we put our customers first. and i would think that most of the industry -- obviously, all of the good actors here -- would support that. many broker-dealers have agreed to support that. and i think that is huge for the department. i think that is the overarching goal of this rule -- to get the industry to support the best interest standard. then i would say the dol has won. they have certainly met that because the industry have -- has agreed; however, i would say

that the way the rule is currently structured is at potentially -- the customers those who we are trying to serve, those average hard-working americans once be able to have the choices they currently have today, in terms of their service models that they enjoy. and the access to all of the investment advising guides. a lot of it is very informal -- affordable. there are commission based accounts, there are fee-based. some get advice and guidance to their 401(k)s. so that is the concern. there is no issue around the best interests. that is the highest ended. and we say, ring it on because customer -- bring it on because customer protection, that is what we want. we want our customers to be protected, the advice and guidance they need to make those

like challenging decisions. and decisions around just how do you plan for life? that is the five 29th -- 529's and all those various things. so what the will have to allow -- the -- the structures in place so that they can continue to get that advice and guidance. mr. norris: if i could interrupt -- >> -- if i could interrupt for one second. some people seem to think that they are already. mr. smith, you have a lot of experience at coping with the nitty-gritty. and i suspect that if this rule is enacted, you mr. norris: nonetheless, for reasons i cannot understand, you have been a critic of the role. what expected consequences most

by the you and how certain are you that those costs won't be worth it? mr. smith: there are a couple of interesting points in what you just said. first, you are right, i had the privilege to practice in one of the traditional professions. we have been a knowledge -- for centuries. and we have very well developed codes of professional conduct lots of guidance around that, and i have to say, i am not at all sure that at least in the details, our professional standards would pass muster under the requirements of the requirements of the labor department's proposal. mr. norris: is that a bad thing? there have been a few lawyers who did not live up to those obligations. mr. smith: and we have had solutions for lawyers were have not lived up to that.

it is the department's presiding over the success story here, that the current success story -- has, in fact, substantially protected retirement investors. and when advisers have not looked after the best interests of their clients, the have been solutions available. they tends not to be dol solution, but there have been solutions available. under the new proposal, there is two things we know for sure. about the new proposal. and let me say the -- not to be argumentative about this, but the best interest contract exemption takes more than 400: inches in the federal register to publish. it is hard for me to see that that has a streamlined pattern

for compliance for the industry. there are two things we absolutely know for certainty -- costs and that proposal. first is that technology costs would be substantial. to comply with the proposal. the proposal has three new explicit disclosure regimes of a public website, a point of sales disclosure, and in annual report , and a fourth implicit disclosure requirement, which is that on a six months notice, you have to be ready to turn over to the labor department granular details about all of your account and all the transactions in your account. those are on top of two other disclosure regimes that the department rolled out in 2010 disclosures about how much service providers plans are getting paid, and with respect

to the investment options available to participants of 401(k) plans. so in some cases, have a total of six disclosures. being provided around advice to participates and 401(k) plans. and it is a certainty -- and this is not to impugn motive -- it is a certainty that the cost projections for those technology improvements are low. it is just the nature, the way agencies are obliged to develop those. it is asserted t-bills are low. for example this service provider disclosure was projected to cost $205 million in its first two years. there has been a follow-up proposal fell out industry to can of comment. it turns out the actual cost was a huge multiple of that $205 million. so i am confident that there are

hundreds of millions of dollars in additional technology costs to comply with the rule. and it is a certainty that at the end of the day, those technology costs are going to be borne by 401(k) participants and ira owners. >> as you know, the administration did a study that found many, many billions of costs currently to customers who are those served by their advisors, putting them into high-cost products, etc. compared to the many, many billions of dollars, that may not sound alarming to someone those costs, assuming you are right. mr. smith: it is -- getting into the debate here about the various academic studies that are out there, what they mean in the circumstances, what

conclusions you can fairly and unfairly draw from them, the additional data that will come in through the notice and comment process, other studies that show, for example, that -- that favors who work with advisors -- savers who work with advisors can have larger balances than folks who do not the data is what the data always is. our cost projections are imperfect. our projections of benefits are imperfect as well. the department is -- the department speculators that if this proposal goes through, that costs will come down and that investment results will improve. for retirement savers. and it is hard to argue about that. who wouldn't be happy if that was the case? from the industry said, there is

some concern that smaller players will be squeezed out of the markets because of increased compliance costs and risks that choice may contract for retirement savers -- you know -- floyd, if you are an investment advisor and you are looking at 1% a year, just say that, a reasonable compensation for your services. if you are working for somebody who has a $10,000 account, 100 bucks won't get the job done right? it won't let you make a living, it won't let you -- mr. norris: how is that different from the current situation? mr. smith: in that current situation, you can approach that relationship in a different way. you can be, dated on a commission basis. mr. norris: please, do. >> so they listened to and

accommodated the valid legitimate concerns. so the rules still allowed commissions and other appropriate forms, even revenue-sharing payments. so the business model is still going -- they are going to have to provided vice subject to the best interest standard and charge reasonable fees, have policies and procedures that are reasonably designed to minimize and appropriately manage our full complex of interest. and that strikes the right balance. regarding the excessive compliance costs and it being passed on to investors, the industry has made a lot of technical objections about how they will raise their compliance costs and how it will ultimately filter down to investors but that denies the fact that there is already judiciaries who are serving small dollar, small

balance investors. the are doing it according to a judiciary standard and they are doing so profitably. so there are robo advisors who use high-performing, low-cost investment advice -- >> [applause] mr. hauptman: but it is in addition, so you have new entrance who are adopting technology -- entrance -- et ntrants who are adopting new technologies. but -- but $50,000, which i believe is a relatively small balance, offer costs and advice. >> can i jump in -- i think that the balance interest contract is quite simple. it is just saying, make a

promise to your clients that you are putting their best interests first develop some policies to make to your my finger employees. and be held accountable if you do not do that. this 400 pages of proposed regulations -- the department did not comport saying this is the plan and this is what we are doing. they invited extensive comment on every piece of the regulation and the exemption. so, it was remarkable to me when working on this to see how much everyone had in common here. everybody is trying to get people to save more for retirement. the decisions are complicated. it is up to an individual to manage their retirement savings. i think the goal here is for people to come for from all sides and all perspectives and tell the department, how do you make this more workable?

many people came in to tell me they use disclosure, they have recommendations on disclosure, and i would say, come forward and tell the department how you would design a disclosure that you think is effective and works. but disclosure alone cannot be a solution here. you have to pair disclosure with accountability. mr. norris: let me interject here just for a second. have used a few terms that some viewers might not know. you also mentioned robo advice. that is a term that was new to me when i started researching this. could you explain what we are talking about? mr. hauptman: it is technology -- computerized models that provide high-quality low-cost investment advice. so there are a couple like personal capital, that are meant

-- that you can go online plug-in the amount of money want to invest, your goals, your risk tolerance, your time horizon and the invest the money for you. but in addition to robo advisors, there are actual people you can go to. professionals provide financial planning services subject to judiciary duty. for example, the garrett planning network. they provide high-quality, low-cost judiciary advice. and they do so profitably. >> just a couple points. number one, you mentioned -- which is a fine company. the one observation i would like to make, however, as you mention the $50,000 account being, in your mind, i guess an average type of an account. if you look at some research that was done by the firm in 2011, the average ira account

was probably in the range of $10,000. certainly less than $25,000. substantially less than $50,000. but i will also like to go back to the best interest exemption that has been proposed, and that exemption requires that you agree to act in the best interests, that you have policies and procedures that would mitigate conflicts of interest. i would say that the contract itself has its own problems. you are required to get that contract signed before you have a conversation with an individual. frankly, i don't know anyone who is thinking that they are going to sign a contract with you before they have heard what you have to offer. mr. norris: the contract they are signing would not require them to go ahead and accept your services. ms. smith: but they still have

to sign the contract. please -- you are required to get the contract side. -- signed. >> when you have a contract, you have to include the representation. mr. norris: one thing we haven't said very much about here is the actual conflicts of interest. i am going to run through what i am sure is an incomplete list. it is said that the very existence of commissions could be a conflict of interest because it is presumably be advisors wanting the have more transactions which would generate more commission. it is said it is a problem at the broker will get better conversation if -- compensation if he sells you a mutual fund from one company then if he sells you a mutual fund from another company. some foreign governments have

simply said, none of this is allowed. this proposed rule allows a lot of it under safeguard. ip go safeguards let to those 400 column inches. sounds to me like the industry scored a big victory in this. am i wrong? >> i think at the end of the day, i don't think the question is going to be about the best interest standard. i don't think the industry's concerns will be about disclosure. these are heavily committed industries already. disclosure is a fact of life. if there is a sensible way to provide that disclosure, i think that won't be a problem. the question is whether if this exemption is, in fact, workable or if it is a poison pill. whether it is something that just can't be accommodated in a reasonable way in the real world. i would not speak for fidelity,

but if fidelity 401(k) participant accounts. there is not a chance in the world that they will get 17 million people to sign those contracts. just will not happen. that is just one example. >> what would happen -- i happen to be one of those 401(k), ira clients at fidelity. i've been known to throw a mail i get. i do not want to in any way indicate others do that. what happens when i throw away the mail that is asking me to sign this contract? does anyone want to tell me? >> you are assuming that will be a requirement. we agreed with the first repose all was completely unworkable. i was a critic of that. it is not clear this is an equally balanced champion --

those who are critics -- but he is correct those who execute the contract, it will not be workable. that is why we have a common time. there are problems with the proposal that are unworkable but that is why we do not take a scorched earth attack on a proposal. we have instructive engagement as most members of the industry have provided and many of the broker-dealers have not had a major problem with it that deal with these issues. there are a couple of problems that will be unworkable for the industry and i expect them to be -- i think these things will be dealt with. the big exemption is really only three pages. 400 pages -- >> i am adopting that term as the best interest. floyd: thank you very much. [laughter] mercer: dealing with the industries often legitimate

problems. i have a chart and if i am a law professor and is and is eventually you will -- conflicted conversation. what this shows is each of these complex is paying in basis points, to a particular broker-dealer for selling their funds. >> a basis point is one 100th of a percentage point. roughly 1/8 of a percent. mercer: the conflict of interest and you might be more incentivized to sell this fun and get more basis points than this one at 2.4. the cynics might think these are obviously the funds being sold. edward jones is a broker-dealer and the overwhelming majority are american funds managed by capital research, one of america's great companies along with fidelity.

it shows edward jones is managing the conflict of ventures to a large percentage. small percentages are being sold to these fund company shares. what they want to do and what is already hired -- required, is that you have procedures in place to manage this obvious conflict of interest and all dealers already have relative distribution that was like this to disclose those conflicts and tell the customers what they're are paying and dollars common idea of what conflict might be costing them, and then there are a couple of ways that it will be too expensive to comply with. this is concretely what they're concerned about. all of this can be solved with that small account of $10,000, instead of selling them a fund that charges a 3% load, they pay $300, which would be typical, and you have to think hard about whether you should also sell 4%, 5% and 6%.

the broker in that case has incentive to double his conversation by selling you a virtually identical fun for twice the amount of money involved. concretely, that is what we are talking about differential agreements for the same thing, and this shows revenue-sharing payments. >> i would like to agree with the professor in a couple of respects. in law school, i always agreed with my professor. [laughter] i want to say that you are right. this is a proposed role. what the industry would like to do is to work with the administration and the dol to get this right. you are correct there are unworkable provisions and we are very concerned that from the perspective of the participants and a note there are -- i know there are concerns, but at the

in of the day, you have real people who are trying to make difficult decisions and who are trying to get it right. we want to continue to work with the administration. i agree with you wholeheartedly in terms of the principles presented by the administration prior to the proposal of the numerals, meaning the standard meaning there should be reasonable compensation. the other thing is there should be disclosure of conflicts which is what this is all about. the same time, the ministration did say middle us investors will continue to have twice the access to the products and services that they get today. for us, it is the things they need and want on their own terms. i think there is a path forward and the industry wants to continue to work it out. what is important is that we

want to actually see what they're thinking about. this is the second time we have have the re-proposal. we want to make sure we get it right for all stakeholders primarily for the average investors, 80% of customers we serv average everyday, working people, and we need this to work for them. of the 17 million customers in the 401(k) plan, it will be a challenge to get them to sign a contract, even if it is three pages or 300 pages. it is not what they're used to doing. the contract has been entered into the plants here for most participants, they will think the, the sponsor whomever, fidelity, if we're lucky enough to get the business, they have engaged with them, so ice -- i can assume that they are providers comfortable with it. to suggest to them before you

have a conversation around take him a hardship, because that happens every day, you say, you have to sign this contract. and for most of the customers, that will be frustrating to them. they will be confused, and for them, they just will not do anything. they will not do anything to put them on the path. >> also, it is great to hear how much there is agreement on the panel and how much people think that they want to contribute to this comment process. it is a relief to hear that. but, i will say there is a lot of evidence the department learned a lot over the five years and changed the proposal substantially from what was originally put out there in 2010. they listened and there is evidence they listened. if everyone in struct of lee engaged in it again, i think you will be surprised what you find on the other side because they are transparent about what their

questions are, what the various ways are that they could take the final role. some examples of the things they did that would be changes and were responsive to what industry asked for, they did not ban commission and revenue-sharing. they said to figure it out and we want this to be business model neutral and preserve choice. people want a one-off transaction, they should be able to have a one-off transaction. so they preserved that flexibility. they also radically changed the legs engine's are usually handled by the department and offered a standards-based approach. the industry said the way the rules are currently written, they are very narrow. anytime we want to contemplate changing business practices, we want to negotiate a new exemption that is not workable. the department said, let's see if we could modernize this and make it more adaptable to the contemporary marketplace and

allow businesses to evolve over time and change practices. that is the essence of what this contract is trying to do, saying to develop policy procedures be able to update and change your business models without having to come in and renegotiate and show to the regulator everything you want to do. classes is me, questions from the audience. i want to interject there is a fee charged to mutual funds which enables brokers to be compensated on a continual basis for the fact that their investors own that mutual fund, and still to claim that fund is a no-load fund because there is no upfront sales charge, they have been controversial in the past and are widely excepted. that is what a 12 b-1 fee is.

>> when you talk about the contract exemption, it does alter the choice of investment products and services. the dol has proposed a limited list of investments in which you might recommend to a customer. none of those investments would include futures commodities, which may in fact be appropriate for particular customers. the person who is the financial professionals should be allowed to exercise professional government -- judgment, based on all the circumstances, about which particular services are ones that best meet the needs of a particular customer in front of them at that moment. >> this question is coming from someone in washington dc named john. what current practices would be prohibited under the proposed rule what time do they supported

or is the universal opposition? >> one thing i want to point out in particular, this goes to policy dealing with the coverage issue. if you think about tomorrow's plans, those with less than 100 participants, under the current structure of the rule, i doubt the dol had this intention but the -- the way the rule is structured, financial advisors would not be able to help small businesses with the formation of plans and for those who currently have plans, with maintaining those plans. for a lot of small businesses, it is difficult to determine what the appropriate contribution levels they should require into a plan. they have concerns about the appropriate investment options.

there are a lot of funds -- you would not be able to engaged in conversation. floyd: what other current practices would be prohibited under this rule? mercer: policies and procedures that would be reasonably designed to mitigate the harmful effects of conflict of interest. they could not structure their compensation regime to reward the selling of certain products. they could not face bonuses or sales quotas on the sales of certain products. they can still charge compensation, which means a higher amount for selling one product over another, but it has to be based on neutral and objective factors. this is quite extensive.

etf, exchange listed stocks, corporate bonds treasuries, so what it does not include his derivatives, like future you would like to include. it does not include private equity, these are riskier assets that are usually allowed -- floyd: that only rich people are allowed to buy. micah: that is right. they are more risky and less transparent here and not saying a retirement investor cannot have those assets. if they want to invest in those assets, they can ask their broker to investigate and warrior -- in order because it is fine. the advisor can recommend they hold them outside the entire account.

or they could recommend that announcement the not pursuant to the compensation. just to say that something is to say that something is public and traded insecurity, it does not mean there is more risk or less risk. it depends on the market conditions and a lot of things. my contention is it all to the left to the judgment of the professionals, dealing with the customer's best interests. options and contrast will provide a hedge exposure because they are trying to limit their risk and except that they are moving into riskier instruments. that is in their best interests. it is not necessary to say everyone has to have the same one-size-fits-all suit.

sameera: i would add if an advisor does not receive compensation, they should make those still and receive compliance and their products. if there are reasonable ways to think those products can be a common aid within the structure, go ahead and propose it as well. >> back to the question you had, hate to descriptive one point but with respect to the various forms of compensation that is allowable in the market today under the exemption mercer mentioned, it is the case all of those forms of conversation would be allowed. outside of that exemption, the proposal would disallow a great many of those forms of payment. >> you know that is not true. issue only arises if you have

conflicted compensation in the first place third as you know most commodities transactions, do not involve non-sea level compensation paired if the industry has examples of compensation models -- i would agree the dol should not be making judgments about types of investments, but technically nothing is prohibited. it is only prohibited if you insist your structure pay $10 for selling a and $20 for paying b. otherwise, there is no issue. as far as prohibitions, what i would say is the practical effect of the rule, what it is going to be is in arbitration where duty violations are the

most common claim, with the rule will do is prevent and -- a defendant from arguing they're not a judiciary. i know this is detailed, but what happens in arbitration where all are litigated, and arbitrators do not jump to any specific source of law, they apply the laws, you currently have to show the relationship then it is easier to win your case as to what the duty required. what this rule will do is in that litigation, it will be a given because of the contract provision. >> i want to get a few more questions in. do you predict most firms will

use the best contract exemption. conflicted compensation methods? >> i would hope once we are through the process that we would come up with an approach where it is workable and i am not sure if it will be the exact contract, if you will, but there needs to be a way customers are protected, and perhaps it can be enforceable and enforceable -- the service and financial advisors accountable. i am not sure how that would end, but a continuing conversation with the department and the administration i think should go forward.

>> i agree with pam on the spirit all we are looking for is a legally binding contract that holds advisors and their firms accountable. there may be some issues as to timing about when the contract is in place but these are technical issues. floyd: i received another question that is relevant. would it be possible to ask the department of labor service to provide, rather than forcing providers to seek it in million plus contract individuals -- in other words, you would have to get permission for the proposal and if you got it, it would cover your clients. if you did not get it, he will make an army with the department of labor. >> i think it is a given.

[laughter] mercer: investor advocates was a that is too much of a burden and i do not think that will happen to her to the other question i think what towns like is a per entity tension process. that is clearly not workable. not an exemption that everyone can rely on. what will happen is what you have is a negative consent letter. they will send out a min ms. to every contract where they can say, we do not like this, but here is what we are now subject to and maybe they will allow you to have the idea of the broker-deal being judiciary. as far as new entities or new customers go, this will be added to the contract in the fine print of the bottom, right next to the mandatory arbitration provision.

there are a lot of rules those people don't do anyway but there are a lot of harm in them. no objection to laws venting it. anyone want to answer that? pamela: there is no harm to adding additional rules that say you shall not do what you shall not have already been told not to do, but i think there is more to it than that. he will also have to build judicial systems that are currently not required today to conform to those requirements. in fact, the reality is people are already file eating certain

roles if they're doing some of the conduct described. a rule where they used to step up, securities commissioners state insurance, state banking they also have a role to play. the justice department and the u.s. attorney's office are adequately equipped to come in and take care of it, whether it is sanctions penalties, jail time, it does not matter. if you are violating a rule, there are consequences. >> the other thing to not lose sight of is we are talking about requirements, not banking insurance and investment products. congress has always placed a higher standard on retirement savings when they passed -- there has always been a higher duty oath to people saving for a time and in part because there

are so many tax incentives that drive people into that marketplace. we have always had to work under so many overlapping of regulators depending on the phase they have entered into. >> protections, that is important. i would think most folks in the industry would agree. what is concerning is that when you come out with regulations that may be overly burdensome, or extremely costly, or those that would cause some confusion among the customers. you are right in terms of retirement savings, that is important. however, most customers, when you engage with them, whether it is a retirement account or not they do not understand why your engagement would be different to all they understand is, we're coming to you for help, and they

are looking for uniformity, that is important in terms of the regulatory approach. i would say once again, as we work through the will with the department of labor and the administration, that we come to a place that makes sense and is workable, primarily for investors and the service providers who are trying to give them products and services they currently receive today on their own terms. >> low fidelity have a different contract for retirement ira accounts? pamela: i am not sure up in hopefully, we will work with the department of labor to come up with something that makes sense. floyd: the fcc was supposed to deal with some of this under dodd frank. it has not. when i go to an investment advisor seeking investment advice, i expect the same standard, i think, for the money

in my ira's, for the money out of my ira's, in terms of trying to go with my best interests. should we just have a rule like that for all investors? >> the question, as you say is very complex. you have got the interplay of the regulatory structure versus the investment advisory part. when the fcc did a study in 2011, that was mandated under the dodd frank act, in which the staff recommended that the commission treat broker-dealers the same way you treat investment advisors, as it relates to aligning the standards, that was the recommendation in the report. then ranking member barney frank sent a letter to then chairman sapir know in which he told her if congress wanted to remove the exemptions out of the 1940, which governs advisors, it would have amended the statute.

it did not ask the commission to do that. they asked the commission to come up with a different and not less rigorous standard. it is seeing the efforts of the commission ground to a hold as people tried to figure out exactly one -- how one a kabul shoes that result. the point you are making is that , for the protection of investors, that is what the federal securities laws exist for. does not matter if the investment is for retirement college savings, and for your own enjoyment. you still have the investor protections part of the federal securities law. i do not see a difference between the two. the key is whether you have additional things that only apply to the statute, which is a sole interest standard. >> it exists because congress made the direct policy decision that we should care more about protecting other assets. cannot agree more strongly with the idea that what i invest in for pleasure should be regulated

the same way as what i invest in for my entire security. a new standard, one reason why the fcc should not be doing this and dll should. i derive no more pleasure out of watching members of congress trash the sec for being incapable of getting any rules done, until we are talking about the dol rule, when all of them want them to have exclusive jurisdiction. i agree with the side that says right now, the papers getting rules done, and if you look at the principal trading exemption they have had a temporary rule in place and we are now going on for eight years, it seems incapable of adopting. you want an illustration of the job they would do, there you have it very dol also covers nonsecurity spirit securities regulations apply to securities but unfortunate, a lot of people whose iras are getting put into non-securities, often the most abused investments and retirement plans. there are a lot of ways in which they does fundamentally different. floyd: be specific.

what abuses are you referring to? mercer: gold and collectibles. a high percentage of abuses when some of -- someone's iras getting put into those assets. you're not subject to jersey -- two jurisdiction. >> regulated as insurance. sameera: if the fcc was able to move forward, if they can move forward, the department of labor is ready to ordinate with them as much of possible. if he does departments have a long history since they shared jurisdiction over similar spaces, though they have different underlying statutes and responsibility are there used to working together to the sec gave a lot of consultation to the staff on a proposal. the secretary had many conversations as well on this. the department stands ready and willing to work with fcc when and if fcc does proceed. >> at the same time the dol should not be forced to wait.

we have been waiting for 15 years? nothing to show for it. mercer: the mid 90's, which identifies the exact same conflicting scenario, and the fcc has been promising for decades they will do something about it but it has done nothing. >> of course, if you are a regulated company, it will drive you nuts. >> i represented the dealers and a joke me nuts. >> it drives me nuts we would do on this issue on a piecemeal basis and that we might have to spend, do what we have to do to come into compliance. mercer: i worked with dol on rulemakings and you know there is an intensive amount of ordination between the two. and that a lot of people -- expertise and vice versa. notwithstanding critics, what is going on and is still going on today, you can see in the proposal there was a very effective coordination as far as some issues we discussed in proposals. >> we have a loaded question

from the audience i will read and try to modify a little bit. isn't this just another example of where the administration has overstepped its bounds, and we just have to wait for the course -- the court to overturn it? my modification of that is, is this regulation, when it comes out, likely to be the subject of litigation from the industry? what part of the industry is likely to litigate and are the courts, notably the d.c. circuit court of appeals, likely to tell the department of labor to back off question mark -- off? >> i would say the industry is artie backed off a lawsuit and made a number of allegations about inadequate cost-benefit analysis. it is standard fare for the industry. i have to ask whether they plan on suing. mercer: they will certainly superior in some indifferent and closing remarks, but on this

one, i do not think they will win. the d.c. circuit has not even split between republicans and democrats, so the voting is different from what it used to be. pamela: i know we are short on time. i just want to say this is a proposed rule, as i said before. currently, the way it is structured, it is not workable. it does not work for participants so they could get the advising guidance that they need. if the dol would continue to work constructively with industries and come up with a rule that ties back into the principles articulated before, the things they said would be necessary to put forth a best interest standard. i think we could get to a place that would make sense. the dol before this is

finalized. i think they need to fulfill those requirements of a principled based exemption. that is what we were told what happened before the rule would come out with 460 plus pages. it is hard for me to see that as principal base. it seems like more specific and rule-based. i would encourage the dol to continue to engage constructively with stakeholders , to let us see exactly what they are thinking in terms of the proposed fixes so we can all engage in a conversation and, with a rule that make sense for the investors. protect them obviously there that is very important. the interest standard would allow the products and services to continue, and they could get what they need on their terms. the i would say i agree with pam, but at this point, it is not enough for industry and maybe fidelity is different, i

know pam and i have had constructive conversations, and i hope they continue but it is not enough for the industry to say it is unworkable. they need to come to the table in good faith and work constructively to ensure a final rule that actually works with those principles in mind. with i will say i hear that is happening. it is encouraging to hear that people are coming forward and filing comments with the department of labor, are talking to them, and offering their suggestions on ways to improve it. >> i would say it should not just be the industry. there are other stakeholders involved as well. i think all of them ought to be around the table. major regulators on the state and federal level as well, to make sure there is a coordinated approach that works across the spectrum. floyd: on that somewhat optimistic note, i will add, thank you all for coming and thank you for joining us spirit whether you agree or disagree

with the panel, thank them. [applause] >> a wonderful segue here. i would like to introduce as our final speaker ken bentsen the president and ceo of securities industry and financial markets so's nation. 10, the field -- the floor is yours -- ken, the floor is yours. ken: thank you and first of all, let me thank you for hosting this important event on what is a complex and extremely consequential manner. -- matter. i appreciate the views of the panel to personally found them very interesting. picked up a few tidbits about what my organization will do that i do not know about. it is always good to learn. [laughter] i took notes on that. but let me make a few remarks. i wrote a few notes as we were going through a couple of things

that were brought up. one thing i think we can all agree on smart full -- our current target market holds 27 trillion. employer response retirement plans, ira's, or both in 2014 at ira's is made up 10.9 percent of household financial assets at the year-end of 2014, and the year-end 24,000 household had 9.9% of their assets in 401k's or other similar retirement plans. in 2013, that eight out of 10 near retiree households recruit benefits to find benefit and to find contribution plans sponsored by private sector and government employees, or ira's.

we're moving in the right direction. i think we would all agree we have a ways to go to continue to bolster the retirement marketplace. it is imperative we continue to move forward to make retirement saving easier and more decibel and avoid the steps that make it more difficult. the discussion today, in our opinion, is not about who is for or against the best interest standard pair it we believe the question has been asked and answered. my members include broker-dealers, asset managers all across the united states of all different sizes serving all different clients who provide multiple services in the retail institutional markets, including commission-based brokers services under the securities exchange act of 1934 and investment advisory services under the advisement active but -- of 1940. long ago preserve the best interest of standard of care for all retail investors and not just the retirement sector. winter is it before congress and an act section 1913 of. frankfurt we have made our

position extremely clear in letters to the fcc in 2010, 2011, 2012 2013, as well as the to the department of labor in 2011, i guess when that went in. further, while the fcc has not yet acted under the authority explicitly granted to them by congress, it is worth noting the rules and precedents governing conduct with respect to retail investors, both in retirement and nonretirement accounts, have migrated toward the best interest center. i think mercer noted that in his comments. congressionally mandated independent regulatory negotiation which -- on behalf of the fcc, it has been refining its definition of suitability under 2011 and most recently under guidance related to 401k's and similar plan rollovers under regulatory notice to require brokers to put clients best interests ahead of their own. further, investor claims and this was also noted in the

panel, investor claims and arbitration routinely include judiciary component. i do not say this to argue we should stop here.but rather to point out where we are today, which often gets overlooked by policymakers but is already accepted by firms and -- and their compliance officials. the debate is not if then how we should implement the standard. in our view, a standard should be consistent across the entire retail market and it was addressed in one of the questions that floyd had from the field. it should be consistent, in our view, with the intent that congress defined in section 913. the concern with the department of labor's proposal is not with its definition of best interest, or as i stated, we support that and that is largely where we are today. it is rather the further conditionality and restrictions on investors at the department seeks to impose on top of and beyond the standard that we believe is extraneous,

burdensome, and perhaps ultimately in a practice inconsistent with the best -- best interests of the client. the proposed definition of who are the judiciary's is very broad and come to see many more than ever intended or that the department originally proposed in 2010. for example, the exception for the previous version allowed brokers to market products and activities to retail customers this time around. there was no exception to market ones of services or products to a retail customer or to the small business owner. while there is an education exception, it is more narrowly crafted in the current education bulletin that has been in place and's 1996. under the current proposal, one could no longer name any specific investments without the activity becoming a judiciary committee -- activity. the mechanism, which was discussed, by which the rule could be business model neutral and allow for commission-based accounts, the best interest contract, or it could also be seen as the b ice insane --

contains so many restrictions that our members receive so many on crafted. with all to -- all due respect i personally believe it is quite sincere in its efforts on this proposal. i truly believe that. the exemption is complex and confusing, but certainly not streamlined. this is material and at the vast majority of ira's and for that matter all retail accounts are upheld in brokerage accounts investors routinely choose between commission-based and fee-based managed account spirit almost all of our members offer both. and in -- investors have overwhelmingly chose brokerage accounts, including for ira's. the contract exception would subject firms and advisers to a new legal liability, discussed to some extent, on top of the existing legal liability. limiting investor choice of product, and in our view, imposing fees at the firm level

and requiring firms to develop and build unprecedented could disclosure and compliance regimes, some of which may well conflict with existing security flaws. because of the increased liability risk and compliance costs, firms have indicated the safer course of action may be to migrate most commission-based accounts to fee-based accounts than in most cases are exempt from the role. however, fee-based accounts cost of the investor more than commission brokerage accounts because the service and compliance costs associated with the accounts, and most firms limit such accounts, potentially leaving millions with no options for advice or guidance. as noted, one of our fine members has recently put together a small balanced account, but it is a $50,000 balance and as one of the pet -- one of the panelists noted most ira's are below $25,000 in balance. i think perhaps in addition, the fcc has questioned whether high

costs, higher costs fee-based accounts are always in the client's best interests, to actually death particularly buyer and holder investments which create a conundrum. clients have largely already made the choice of the types of accounts they would wish to purchase, a choice they may be forced to lose. ironically in the dll's israeli tory impact analysis, and the previous council economic advisor study in support of the rule, mention a couple of times today, a study we believe is seriously flawed, including the 17 billion dollar figure, which we do not believe is supported by the research cited in the study, in that study, the department cites the recent experience in the united kingdom through its retail distribution reviewed in support of its effort to floyd mentioned, a question was raised in respect to this, if you read the research with respect to the u.k.'s proposal, and this research was commissioned by the

financial conduct authority of the united kingdom as part of their post regulatory review that they do, if found that more than 300 investors lost services from brokers because they set minimum accounts. 60,000 new clients were turned down lester and the cost of advice has gone up. in our view, that u.k. experience should be a warning as to the potential for unintended consequences. in response to the panel's discussion regarding the comment process, and i appreciate that and we were obviously very involved with that and i will make sure to leave the flamethrower at the door the next time we go into another meeting with the department of labor, because we met with them i think a week after the rule came out to her multiple meetings with them. we spoke with them on a regular basis, even while we were discussing this back and forth the team was talking to them about prohibitive transaction that have been in the works -- in the works for years on a regular basis. we have a regular dialogue with the good people of the dol even

when we have disagreements. with regard to the current process, and we agree this is only a proposal and there's no question about that, it is a complex proposal full of fine print to record a couple of panels, which i get a kick out of, having trained in economics and finance. but nonetheless, it is also someone ever -- something everyone agrees is a proposal on all sides that needs amending in different ways. we think it needs a lot of amending because it is unworkable as it is. the problem is we have to take into consideration that it is a very absolute statute. you are either in balance -- in bounds with significant liability as a result of it. furthermore, the way that it operates is not where, mercer

mentioned the issue with the prince will transactions, take your point that has been going on for a long time, but it is not a situation where the department can in a short-term basis, if the will is not right -- make a short-term correction and then come back and fix it later. it is not right, it does not work, you cannot do it, you have criminal liability and tax liability, and you have that until they get around to fixing it and doing prohibitive transaction. as i pointed out earlier, we have been in negotiations with them on prohibitive transaction provisions in other rolls out there for years. it takes a long time. the point mentioned on the account, the small balance account, 50,000 balanced account, it comes out of a rule that comes out of a 2016's of legislation at the rule was

written in 2010 and it took from 2010 until now to get the product developed. these things cannot just be done automatically. that is the problem. i take the point that we are in a comment time and we will certainly comment. our lawyers are looking forward to writing a multipage comment letter. many lawyers are. 600 things we have a problem with, 190 things we want answers to, and then we will come out with a 10 page rule and 700 pages of guidance, prohibitive transactions, and other things behind it, and some things will work in some things will not but that is it. it is like a statute and that is it to you have got to live within it. at is where the firms say it is not workable. let me just close with this. this is not about being for or against the best standard for we believe the question has been answered. we are very clear in our position and being in favor of it. i would also point out, let me

just get to this, the industry 's's has been quite clear. it is how you do it. in our view, the department has proposed a draft that goes far beyond such a standard to limit choice and raise costs and unnecessarily so in our opinion to equally troubling, i think is that the experience underscores a failure in the public policy marketplace, something i think the bipartisan policy center is interested in not just in this area but across the board. it is absolutely the right question to ask. we are, rather than adopting to a policy prerogative, we're headed in a direction of rules imposed on the same market participants. both progress -- and -- it is hard to see how investors will not be confused and the industry

forced to build redundant systems that would further affect cost. it aims illogical we cannot adjust this in a uniform manner. with that, i appreciate your time and i appreciate you for hosting the event. [applause] >> thank you, mr. benson. thank you floyd and panelists. i am not sure we resolved all of the issues that surround the proposed regulations. it really was not our intent here this morning. i apologize to those who had questions we were not able to get to peer hopefully we have provided you, the audience, and the listeners out there some insights into proposed regulations, and their development and goals. i encourage those who are listening and those following this, to participate in the regulatory process, submitting and getting your views and points in.

thank you for coming out and we appreciate your attendance here this morning. thank you. [applause] (202) 628-0184[captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [captions copyright national cable satellite corp. 2015] >> just to let you know, this discussion from the bipartisan policy center, including the remarks of the head of the national economic council will be available shortly on our website, c-span.org. although congress is out this week, lawmakers are still making news. the hill reports house democrats defending minority whip lawyer's call for a lawmaker pay raising, he is right to warn congress -- they say last week it became a highest ranking member of

congress to endorse increasing lawmakers salaries to keep pace with the costs of living. the house overwhelmingly approved legislation that cap in place -- read more at the hill.com. coming up to 20 five minutes or so, vice president joe biden will deliver remarks on the russia ukraine conflict and implications for the brookings institution. more road to the white house coverage this afternoon on c-span. hillary clinton named club in south carolina, speaking to the south carolina caucus and the south carolina council. it is her first trip to south carolina since announcing her candidacy. later at 5:00 p.m., 2012, rick santorum. the washington post saying he will formally announce his 2016 candidacy in a manufacturing plant in pennsylvania, the town where he grew up north of pittsburgh. live coverage of that at 5:00

and we will follow that with your phone calls. for the next 25 minute tour so, until the start of vice president biden's remarks, a segment from today's "washington journal" with richard lugar. host: and we are joined by former senator richard lugar. what is the lugar center? what is the lugar center? guest: it is a think tank. we have the agriculture committee, and others, working with food security, arms control, bipartisan politics, various other things. host: all those issues you worked on when you served in the senate. guest: that is right. i am affiliated with indiana university. and it had -- serves as the headquarters drama activities. host: let's talk about reviving bipartisanship.

you call it a lost art. at the lugar center, you have come up with an index to track and chart how lawmakers are doing on bipartisanship. how are you going to go about scoring, if you will, their bipartisanship and bipartisan efforts? guest: well, the basic factors are how many bills a member presents. and get bipartisan support. the opposition will, as well as their own party. or if you are looking at a piece of legislation across the aisle how many things you cosponsored that were started by a member of the opposition. in essence, this is a way of scoring precisely people who take time to legislate. they really want to do something to move things ahead as a result -- and as a result, we have

taken a look at 10 years of congress, which gives a super good background. we found that the last two preceding this one, were by far the most partisan. sharply so. this one remains to be seen. we are sort of in the middle of the stream, but nonetheless, we have been able to chart at least what in the last congress members did, every one of them, with the exception of the two leaders in each house who have other tactical situations. we don't count those that are purely ceremonial or naming of buildings and that type of thing. and you don't get counted if you have not introduced at least three bills on your own. aside from that, by everyone who is listed from one to 435 or so in the house and one to 100 and the senate, i think people have taken notice of this. host: why do you think it is important to do this and what impact do you think you can have

by putting the scorecard out? guest: already, we have had questions from members of the senate and house, how can i improve the house situation? the current answer is, introduce bills that attract bipartisan support, somebody from the other part of the senate to come across and help, or take a look -- in other words, get more active. as opposed to simply offering bills that are statements or a particular doctrinal feeling that you have, but has no chance of passage. but meant to illustrate your own political constituents how you feel. host: there are political groups out there on the left and the right, environmental groups that score, lawmakers that score lawmakers, and there is money attached to this course. there is political support attached to that score for them

being partisan. how do you expect a breakthrough that and what do members get in return for the lugar center saying, you have been bipartisaned? guest: we believe -- most polls indicate a lack of support, a lack of confidence in the ability of the congress to work. that is disturbing, in terms of our general democracy. members feel that from time to time, although they also feel the heat that you just mentioned. a scorecard with specific interests. the point here is really that members do have an opportunity to say that i am a constructive legislator, i can get things done, i have good ideas for the country and i know how to put them across. and this is the scorecard that shows really that an objective way, i get the job done. host: i know you are knocking to

score the leaders, but mitch mcconnell taking over in the 114th congress, he has put those on the floor and has more hours of debate for this congress. what do you make so far of his leadership and will that lend itself to more bills getting past bipartisan votes? guest: already, i believe that his leadership has led to more activity and more progress. and i salute him for this. it is not an easy time, and we have witnessed recently with the pacific trade bill for the problems of security that are in the patriot act. but at the same time, he has recognized people are willing to offer amendments, they like to have debates, but it is tough. because, in essence, many parliamentary procedure

situations now require 60 votes. he has just 53. this means on the face of it, he has to reach across the aisle. he has to find folks on the democratic party who make the 60, which he has had to do several times already. in a very partisan congress, this is especially tough to do. so i salute him. host: let's turn to our viewers. the phone lines are lighting up for you, sir. tim and pennsylvania, a democrat. you are on the air with senator lugar. go ahead. caller: good morning. hi, senator lugar. i wanted you to hear from a democrat who respects you a great deal. i really admire your work internationally on arms control and i don't know of anybody is doing that now in the senate maybe you could speak to that. and i wanted to tell you one other thing because i vote democrat almost completely.

but if i lived in indiana and i had to make a choice between you and the democrats, it would have been very difficult. thank you, sir. guest: thank you for your question. unfortunately right now, things are box down with regards to arms control -- bogged down with regards to arms control, mostly due to russia. they were prepared to keep the lugar legislation going, which had been the basic way for 20 years, that arms had been taken down and destroyed in russia. over at the war department however, the russians had, no, we want you out of here. and june 2013 was the end of the trail. most of the folks in congress now have not been concentrating on arms control, but really on beefing up our nuclear security. huge sums of money are being appropriated for the future for that purpose.

and there clearly is no work on the part of the russians at this stage. that is potentially difficult for the world. i don't criticize anybody involved in i understand the national prospects in both countries. but at the same time, it is important that we continue to work at the margins, and i'm attempting to do this with my former partners at the nuclear threat initiative, to try and find whatever materials -- wherever materials are located 25 countries, from the nuclear age. we may get some cooperation from the russians in doing that. we may get some cooperation from the russians in doing that. it is in their interest, as well as ours. but it is very important that we not be surprised from terrorists who sweep in and find materials that are not fully developed. but nevertheless can create havoc.