Wouldnt a level Playing Field as you said from your testimony, we have concerns about things like there is a some Data Retention obligations and we think you could do it differently. There is a best interest contract framework and weve heard feedback from folks saying it is clunky and there is a more streamlined way to do it. We have a point of sale disclosure requirement and people have said that that is not necessary. And so what weve done in every circumstance when someone said that the best interest contract is clunky, our response is tell us how to do it better. How do we retain that north star of enforceable best interest contract and still get it done and that is the feedback weve been getting and it has been helpful. And youve incorporated it. We havent made final decisions yesterday. We wont put out a rule until weve gotten all of the comments. Im confident if history is a guide the final rule will be materially different than and better than the proposal because you have to be a good listener in this business. We havent made any decisions and we continue to open it with open mind. And you are open to suggestions fixes from firms . Not only open we have affirmatively reached out for it because there are a lot of folks who know a lot about it and we want to get their insighted. Darlene miler from minnesota and going to be testifying next, in the next panel president of permac industry in byrnesville, and talking about being a Small Business owner and have a plan on raufly 30 employees and darlene is helping her employees prepare for retirement and setting the right example for other businesses but she has concerns that the proposed rule will jeopardize her ability to provide this important benefit to employees going forward. Can you assure us you will work with Business Owners like darlene to make sure that these rules dont have unintended consequences . I welcome the opportunity. I read miss millers testimony and shes a very successful Business Owner not to mention a minnesotan and weve spent time with Small Business owners. Small Business Owners what they tell me most frequently is im an expert at making my prod urkt my widget. I have ten or 15 people. I dont have expertise in 401 k s, but i know i want to offer it because i want to attract the best and the brightest and what we have done in this proposal is include a number of carveouts for Small Businesses so that they can continue to do that. And actually what we do to help protect people like miss miller is were changing the status quo, because the status quo right now and shes had a good experience with her adviser, and others havent. And when you have a bad experience with your adviser, under the status quo, if litigation ensues the defendant is the business, not the visser, because under the current status quo, the person providing the advice is actually off the hook. I think that is kind of perverse. And i think it doesnt help people like miss miller so i would like to sit down and explain to her the carveouts that help her and other Small Business owners as to why the status quo presented challenges for Small Business owners and we look forward to doing that with her and other Small Business owners. Okay. Running out of time. But let me end with this. Some have said this proposed rule may limit their ability to market their services and products to clients and limit Small Business employers and employees from access to education and Financial Advice. How would you briefly respond to that . Sure. Weve sought to clarify the line between education and advice. Education is critical. The educated consumer is the best customer. And what weve done here is clarify that, for instance if you want advice on how to apportion your portfolio how much is index fund or Asset Allocation. That is total education. Can you run simulations about different Asset Allocation models and that is education. Those are the critical nuts and bolts of advice. And what weve told people who have said to us, we feel the line between education and advice is either blurred or should be drawn differently, again, our response is how would you do it better and what ideas do you have . And so weve heard feedback to that effect. We attempted to be responsive the first time around and our proposed rule is quite different from the 2010 rule in the educationadvice context and we continue to look forward to hearing more advice. Okay. Thank you. For the benefit of the panelists who are going to testify, im going to be strict on the five minute rule sand i appreciate you holding your answers to a concise answer so we can get to five minutes because we are at a definite hard stop at 4 00 and i dont want to run out of time. Senator scott. Thank you. Good to see you. Thank you. Good to see you too. Over the last years s. E. C. Has been the regulator of brokerdealers and Investment Advisers and that is why dodd frank involved them in revisiting the standards of care for security transactions and your department has now stepped and i would suggest overstepped into the area of regulation. Last month at a house hearing you used the phrase dramatic and extensive coordination to describe the relationship between d. O. L. And chair wide on rule making and referred to pages and pages of documentation about meetings and calls between d. O. L. Staff and chair whites staff. Now it is one thing to coordination but that doesnt tell us the whole story. I realize you cannot speak for chair white. She can speak for herself. But based on your private coordination meetings with chair white and the s. E. C. , is it your impression there is no daylight between your thinking and their thinking on this issue . Well i cant speak for chair white on this. What i can certainly say is that the feedback from chair white and the career staff there has been extensive. Weve been talking to the housework force committee and given them i think 800 pages of documents showing the extent of the coordination. In short i think the proposed rule is a better proposal as a result of our coordination. I would node we have some overlap. We are the agency that congress hassen charged with enforcing arissa for over 40 years and while we have overlap we have distinct jurisdictional responsibilities and that is why it is in our lane and weve gotten good feedback from them and continue to incorporate it and we continue to have that responsibility. And that you guys are on the same page or you cant suggest you are on the same page at this point . What ive heard from chair white and she stated this i think a couple of times they shes that she thinks that the best interest standard is the right standard for the s. E. C. Purposes. The definition of best interest that we used in the proposed rule is taken from the 2011 s. E. C. Report that was prepared in the followup to the dod frank law and was done because we heard feedback we should try to harmonize to the best extent possible the work between the d. O. L. And the s. E. C. And in fact, the key definition is taken in large measure from that 2011 report. On the Fee Structure that you mentioned on the example that you gave on the person who had 700,000 and had what would be an appropriate Fee Structure for an investment with a proper risk allocation Asset Allocation. I wouldnt be able to answer that question because i dont know all of the facts about their risk tolerance threshold and what they told their client. Im sorry. Pardon. So you cant really answer that question. Do you have any idea what went into the actual Fee Structure in the product sold . Was it a mutual fund or was it it was a variable annuity. A complex instrument. Did it had a Lifetime Income factored in the Fee Structure. It did. And it was given to a person in his mid to late 70s and who kept copious records. And what i have seen senator. Did it had a Life Insurance component. I dont know if it did. What variable annuities help guard against the risk and give you more reward and what ive seen in the outreach we have done is that weve had a number of significant challenges in the variable annuity context and this family, 50,000 is what they lost. And i believe the soninlaw came and testified because mr. Tofl passed away a few months ago and there was a hearing in one of the committees here and it was a sad story and avoidable i believe. And while i believe we do have an opportunity today to discuss the success or failures of a representative that in the most part so Many Americans will be dependent on Social Security than on funds because they will have fewer advisers in the market and i find youll have fewer folks playing at the most important level of access which is the minimum level of access, smash around the 100,000 to 200,000 accounts and i think youll have more folks making Investment Decisions on the internet where they can have help there. But too many people make their opinion on expertise but on who they hope is a good decision. And i disagree and there is a witness on the next panel who is doing a lot of work happy to continue the discussion. Senator murray. Thank you chairman isakson and senator franken for holding this important hearing. Thank you to the secretary for coming to testify and our second panel. It seems to me that families have a lot to worry about today and questioning the advice that they get for their retirement account shouldnt have to be one of those things so we should all be concerned that workers are losing money out of their pensions that they were counting on for secure retirement and making sure retirement advisers are working in the best interest of their customers is essential for advisers and brokers and this best interest standard is best for the economy to make sure seniors have access to a secure retirement. So it is absolutely important that we get this rule right and i hope all sides will participate in this process and submit their comments and we make sure that the final rule reflects the important feedback that you have heard and i hope that our debate can really center on how to get the final language of this rule right. I know there has been an enormous amount of work put into this since the original version of 2010 and ive heard some critics say that the new rule is worse than that or we didnt learn from the 2010 version so i wanted to ask you while you were here, can you walk us through some of the changes youve made since the 2010 proposal to make this one better . Sure. One of the critiques we heard is that there wasnt sufficiently robust economic analysis. There is a much more robust economic analysis. One of the concerns that was echoed was about a provision we had to regulate esops and appraisals and we heard from people that should be removed. That has been removed from the proposed rule. We heard that we need to establish a vehicle to enforce the best interest requirement and so the best interest contract vehicle is that vehicle. It was not there in the 2010 rule. We made a number of changes in response to feedback that we got from people about where the line between education and advice should be. And so that is another example senator. And there are others. But in the interest of time ill cite those four. And again, what weve said is so give us feedback on how this works for you and how we can effectively implement it and if there are changes were all ears. And senator franken asked you about what you were hearing and you cited a number of things monkey, data enrollment, point of sale discussion and a lot of things and i assume you are remaining open to making appropriate and necessary adjustments to the rule to ensure that both works and workable as you get comments back at the end absolutely. And again weve gotten great feedback from all stakeholders but weve had probably 50 meetings since the proposed rule came out and ive been impressed by the get to yes attitude and others have said this is the right thing to do and they have questions and concerns about how to do it and given us great feedback. And i want to also just ask the current rule was established about 40 years ago. How has retirement market changed . If you could define that for us since then that we should be conscious of in the ozzie and harriet world of yetteryer, people worked 30 years and at the end of it, they had their Pension Party and it was a defined benefit plan and now the world is shrinking and it is 20 of the market. You have defined contributions between iras and 401 k that is 11 trillion market and roughly 2. 8 trillion in the d. B. Market and in a year from now that disparity will continue to widen. And so people have to own in the modern family universe, they have to own these decisions and that is why a rule established 40 years ago when 401 k was a rural highway in the midwest and ira was your elderly uncle, told those are part of our lexicon and that is why todays rule todays Consumer Protection framework needs to reflect todays realities. Thank you. Thank you for all of your hard work on this and for your continuing work to make the rule work at the end of the day, i really do appreciate it mr. Chairman. I will yield back my time. I know you have a second channel. Senator baldwin. Thank you, mr. Chairman. I was told you werent ready. Are you ready now . Senator baldwin. Thank you, senator, for yielding and i want to thank the chairman and Ranking Member for convening todays discussion. Secretary, you just outlined some of the significant changes in the retirement market place. If you think about the ways in which it has changed since a rissa was passed in 1985 it is quite significant. I worry about what the future looks like for those trying to achieve the american dream, living in the middle class, worked hard their entire life but perhaps in the recession lost work, needed to dip into savings, needed to do so for sending their kids to college all that would have otherwise gone toward retirement in addition to any pension plan they had but isnt available any more. We know that workers are not saving enough for their retirement. We know, as youve outlined, there has been a real shift from defined benefit to defined contribution plans. And that shift puts more responsibilities on workers shoulders to manage risks and to manage the decisions. Oftentimes without having investment expertise. Youve actually covered a lot of trt that i hope to cover territory that i hope to cover in my questions with you. In particular, about how workers with smaller accounts, those who arguably need the retirement protection the most, will have access to high quality and affordable advice. So im going to move to something a little bit more specific given some of the proud traditions in my home state of wisconsin. We actually have a history of cooperatives and mutual ownership companies. So companies that are owned northwest mutual for instance. For instance. I got married two miles north of their headquarters. And i had a very good visit not too long ago. But i would say and i would just while tooting the horn of my state, say that a lot of the traditions root back to the wisconsin progressive era where people like senator robert la fallette senior, fighting bob as hes known in the state, really laid the groundwork for the formation for a number of the companies. Now a lot of them have gained incredibly valuable experience that sort of imbedded into the products that they sell. And so i would like you to talk about what what assurances you can give to these sort of companies that they will continue to be able to sell their own retirement products as we move forward. Sure. Those are sometimes referred to as proprietary products and the rule is the same. Whether you are northwest mutual which has a long and distinguished history, and again, i got married a mile and a half north of the World Headquarters in milwaukee. And the rule is again putting your best interest putting your customers best interest first. And mart of pa is making sure you have policies and procedures in place to oversee your sales force. That is true whether it is northwest mutual, whether it is the abc bank. A big part of what the best interest standard means is that you have those internal policies. And so for instance, you are ensuring, in the case of like northwest mutual that might want to sell a proprietary product, one thing i would suggest that is a good idea to ask is it ought to be a product that a reasonablin deposit person would recommend to the customer. And one thing weve seen, and not at northwest mutual but one thing weve seen in the course of the outreach sometimes sale incentives become perverse. If you sell x number of one product, you get a trip to hawaii. And ive heard about the trip to the masters. And when that person walks in to give me advice i dont want them looking at me thinking youre the only thing between me and hawaii with my family. That is when you have a misalignment of in sentives and that is what were trying to address by making sure that we have the best interest standard in place. Now what the best interest standard does not mean is you have to sell someone the lowest fee product. Because i dont buy a yugo because it is a crappy car and that is why it is no longer on the market i believe. But the point is it is not about the lowest cost it is about the the north star is the best interest of the customer and places like northwest mutual or the abc bank or the brokerdealer or the person who is working with the Small Business owner like miss miller, the north star is the same for all of them. Senator warren. Thank you, mr. Chairman. It is hard really hard to save for retirement and the stats bear this out. Almost onethird of americans on the edge of retirement have zero savings and another third have less than a years worth of income put away and that is why it is doubly important that every dollar that someone puts away for retirement is protected. Many americans rely on Investment Advisers on guidance on how to save for retirement and most of them have the savers best interest at heart but not all advisers put