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 incentives 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 their customers interest first and that is creating a hole creating 17 billion a year in Retirement Savings, money into an Investment Advisers pocket instead of the pocket trying to save for retirement. Thankfully that hole may soon be plugged with new rules that require brokers and advisers to put customers interests first so i have two quick questions about this secretary perez. So as i understand it, several studies, and many of them, most americans dont realize that the Investment Advisers arent required to put the clients interest first. They think if they go to someone that advises them they interest their interest will be put first. So explain why it is okay today to steer clients into things that line the advisers pockets rather than Retirement Savings. We have folked that operate under the fiduciary model, we go to a certified financial planner. They are required to put your financial interest first. He said keep your thrift savings plan. I cant do any better. That is an example of putting our even though he wont make money off. Even though he didnt make a dime. But i referred a number of clients to him because he will my best interest let me stop you right there. I get the suitability standard. What i dont get is how do it turn out to be legal . What went wrong. Why is that legal, mr. Secretary . Well it shouldnt be and that is why were trying to change it. Because i think the suitability standard is when was the last time we updated these laws . We havent updated the laws in in earnest in 40 years. So weve got a problem with outdated laws, loopholes in the laws and thats how we end up with two different standards. Again. We didnt think about iras and 401 k s back in 75. We were in the defined benefit world. This stuff just didnt matter because people had a guaranteed pension. So youve proposed some common sense rules to try to close the loopholes to try to update the laws. Just to make sure that all advisers are putting the customers interests first but lobbyers for the biggest Financial Companies and Investment Advisers are fighting this proposal tooth and nail. So help me out, mr. Secretary. What is it they are so worried about . Well little let them speak for themselves. I guess ill say two points. Number one, ive been heartened by the remarkably constructive conversations ive had with so many industry stakeholders. And as i said in my testimony, there has been an undeniable shift toward a recognition of the need for the best interest start ard. And then folks out there since the beginning, merrill lynch, b of a and some of us coming to us wanting to get to yes. And those in a different place, they tell me they would like to think they put their clients best interest first now and my response is there is good news for you. This will be easy to comply with, if you are, in fact, putting your customers best interest first. I think it is something that can be done. I hear from so many folks who are playing in this space day in and day out, we need a level Playing Field. Because supreme go to their advisers and some are dual hatted, depending on the transaction, sometimes they are the fiduciary and it is already confusing to begin with and that is stunningly confusing and we need one standard and it ought to be and i love the one standard and the best interest test but i assume there are a lot of people making a lot of money, that 17 billion is going somewhere and not staying with the retirees and this looks like a nobrainer to me, hard working americans who managed to pull money together for retirement should be able to trust that their retirement advisers are looking out for them and besides that the thousands of hard working advisers and owners who already put clients first every day shouldnt have to compete against those unethical advisers who dont. I understand why were in this fight. I understand there are people making money from keeping the game rigged but we dont work for them. Time to level the Playing Field. Thank you mr. Secretary, mr. Chairman. In the interest of the four panelists that will introduce mr. Casey who will be brief within his five minutes and well have time to hear from everybody. Senator cassidy. Good afternoon. Good to see you. I dont pretend to understand this as you do. So let me channel that of which people have ask me of. A fella came and said listen i have a complaint, hes pretty well off. I go into his office, help him with his Financial Planning and you said do you mind speaking to my employees and give them general advice about how to handle their money. And he said i do it as a favor to my client, but i think under the rule i would have each of the employees sign a contract before i would be able to give them the advice im giving them. Is that true or not . I dont know. Im asking. I dont think that is true for the following reason if you are sitting there telling workers what is your risk, here is what you need to think about, workers, to have a healthy retirement, what is your risk tolerant threshold, what you are married what is your wife or husband risk tolerance. Let me i think you got to the number. You dont think so or you know not. Well you need to give me more facts. I say this not to be ped antic. Because unless he has clarity from d. O. L. , he wont have clarity in terms of how he conducts himself, would he say, okay, i want you to sit here and im going to say this is what you should do with this money. If you are younger put it in this and older put it in that. First figure out all of your risk threshold and thank you, good to see you all and is that something they need to sign a contract for. General advice, not pick this product or that product, but go into mutual funds or index funds, that is advice in education or Asset Allocation so that wont cross the line. Sounds great. And im told the United Kingdom put this back in 2013 and banks stopped offering advice to those with less than 80 k in assets. It may be that the answer to senator warren is this worked for the lower moderate income people, and moderate assets, so just comment on that again. Just your thoughts on that. And it is not true. And let me give you the facts. After the u. K. Put in place the regulation, and by the way their regulation bans commissions. We dont ban commissions. There were advisers dropped 310,000 clients and 820,000 new clients came into the market. So there was a net delta increase after the regulation of over half a million. Investors with low balance accounts continued to be served because you were concerned about that, and here is the most interesting thing about the u. K. And i travelled there to meet with them because i heard that feedback a lot. The most interesting thing that happened in the u. K. , senator, is more and more people now are now getting into lower cost funds because the problem with our system in the u. S. Is it incentivized equity when frequency is what is called for and it incentivized complexity because that generates more fees just like the annuity i described. So the u. K. Annuity experience, i welcome inquiry because there is a fair amount of in correct information surrounding it. Okay. And d. O. L. Is estimated the cost of the rule be between 2. 4 and 5. 7 billion over the next ten years and a study by deloitte said over 10 years it could exceed 15 billion. Any thoughts on that discrepancy . I think our cost benefit analysis is quite strong. We estimate the benefit over the next ten years to be 40 billion. In an 11 trillion market, the cost of conflicted advice, when you have a 50,000 loss for the tofuls and 11 trillion market, it adds up fast and these are folks that cannot afford to lose this. And the benefit im hearing from employees like one of the next panelists has been that Market Forces are working to the advantage of small investors. So i hope youll talk to some of the folks who are already fiduciaries, senator, and doing great work. I yield back. Thank you. Now one of our members is grossly late but hes my dear friend and his staff has been doing me a good job of convincing me he only has two minutes worth of questions. Is that true . I am fully convinced. We have four other people to testify before 4 00. Recognize mr. Whitehouse. And mr. Secretary, you can answer to. And ive heard from companies who are major providers of services to investors who are totally on board with the notion they should have the responsibility of meeting the fiduciary standard but are concerned that around the edges things like the way in which they communicate with vast numbers of customers, that might be effected by this, probably in ways that none of us would intent. And i just want to make sure that you will be attentive to try to make sure there is not too much regulatory sprawl into areas outside of what we all expect which is to keep them putting the interest of the client first. Absolutely. And we had that conversation earlier and we certainly had a number of very constructive meetings with firms who have addressed concerns, i think similar to that. And it certainly wasnt our in tent. And the question we ask is show us in the proposal where you think that concern arises and then show us give us some potential solutions for that so that we can contemplate how to make sure that were getting to the right place. Very good. Thank you very much. And im well within my two minutes, mr. Chairman. Let the record reflect that Sheldon Whitehouse was brief. [ laughter ] you dont have to make it sound like that is a novelty. It was refreshing. Mr. Chairman, thank you for your courtesy as always. It is a pleasure to be with you. Will our second panelists please come forward. In the interest of time im begin the introduction of the panelists to get straight to their testimony. First, peter schneider, the president of prim erika which is a georgia based company. And thank you for being here today peter. Peter is a leader in Financial Services providing middle income market place and offering Retirement Savings and options to millions of americans. Mr. Snyder became president and Vice President for prim erika. We welcome you with being here tote. And we also have scott pure its. Is that correct. Correct. He is from rebalance riera in bethesda, maryland. A retirement expert having been referenced by the new york times, forbes and cbs and has a masters from harvard, university. Welcome and thank you for being here. At this time i would like to turn it over to Ranking Member franken and introduce miller and mr. Littonen. It is my presence to introduce darlene miller. Mostly sunny miller is the president and ceo of perm yak industries in minnesota, a Manufacturing Company that provides precision small part machines to other industries. Permac was the Small Business of the year in 2008 and in 2010 miss miller was named by the byrnesville chamber of commerce as the business person of the year. Ive had the good fortune of meeting miss miller when we toured byrnesville Senior High School to discuss the importance of stem education. We have also discussed my Community College career fund act which would create publicprivate partnership. Miss miller, thank you for being with us today and to discuss how you can best meet the needs of your employees. Thank you, mr. Chairman. Thank you. Well thank you, mr. Chairman. It is my privilege to introduce bob litan, economist and attorney and native kansasan. He has become involved in the Economics Community and brings a balanced perspective and has been in the private, public and government sectors. His lists on Advisory Boards reads like a selection of highly acomplished people rather than one man. From the Bookings Institution and counsel to a law firm based in st. Louis and chicago and chief chick adviser at patent properties, i thank you for taking the time to come before this committee today to provide a view point that unfortunately seems to be lost, if not solely ignored in this conversation. We look forward to hearing your testimony. We hope that you can offer us some solutions on how we can maintain access for middle and lower income families and businesses in regards to Financial Guidance and Retirement Planning. Thank you, sir. I hope all of the panelists will limit testimony to five minutes and after that eloquent introduction, mr. Lectonin, you should be first. Thank you for that kind introduction. Turn your mic on. Throw the little switch there. Where is it . So im thanking everybody again for their kind introductions and so forth, okay. Senator roberts, i dont want you to choke on these words but im a lifelong democrat and a former Clinton Administration official. But very proud to be have kansas. Well that doesnt bother me one damn bit. Okay. [ laughter ] but i say that because i come from a background where i was in the administration where we cared deeply about the kind of goals that the department is pursuing in this proposal. But i want to respectfully disagree with the way the proposals has been outlined and im going to make three quick points. Number one, the correctly estimated benefits of labors proposed rule do not outweigh the costs. Because the labor gives no credit or assigns no value to human Investment Advice. Namely encouraging clients to avoid trying to time the market. One of the worst decisions a longterm investor can make. And also helping clients rebalance their portfolios over time. When these factors are taking into account, my colleague and i come to the conclusion rather than generated 4 billion in annual benefits you for investor it would produce net harm of 1 billion to 3 billion annually depending on how many brokers are induced by the proposal to no longer serve the ira, mutual fund market. During a future downturn dr. Singer and i estimate and we show this in our comments we submitted to d. O. L. Yesterday, that by causing current accounts to be