A major Wall Street lobbying organization released a report on Monday criticizing the economic analysis being used by the White House to push tougher rules on retirement investment advisers.
The White House's Council of Economic Advisers recently released a report stating that consumers unnecessarily spend $17 billion on counsel from retirement investment advisers due to receiving conflicted advice which leads to lower returns, potentially costing thousands of dollars in the long haul, reported The Daily Caller.
As a solution, the Department of Labor is expected to propose new rules that will hold retirement brokers to a higher standard by requiring them to prioritize their clients' financial interests rather than their own.
But a new report commissioned by the Securities Industry and Financial Markets Association (SIMFA) says the new rule would actually cause consumer costs to increase further by forcing retirees to pay their advisers in regular intervals, rather than on a case-by-case basis, reported TheDC.
Furthermore, SIMFA says that $17 billion figure is likely incorrect, accusing the White House of using cost estimates that are not backed by academic literature, according to Reuters.
SIMFA CEO Kenneth Bentsen told The Daily Caller that it "dug into the cited research [in the report] and we found that the report took liberties with what the cited research actually said."
"The White House Report posits that U.S. investors, in the aggregate, bear large costs because of the services provided by brokers who act in their own best interests, rather than the investors," the SIFMA report said. "While the Report points to academic literature to support these aggregate cost estimates...are not directly found in the academic literature. This approach is flawed in multiple ways."
Bentsen said SIMFA couldn't figure out where the $17 billion figure came from, since it didn't come from any of the cited research. The White House likely relied on "generalizations and extrapolations" to generate the data, he said.
"It wasn't clear what kind of methodology the CEA used to come up with its dollar amounts," Bentsen said. He added the White House used what appears to be a "simplistic and probably incorrect method to assert the dollar value of $17 billion. It was rudimentary at best. This is not a cost-benefit analysis. This is trying to build a political case - ignoring empirical data," TheDC reported.
