Capitol Hill. (Courtesy of Wikimedia Commons)

On Wednesday, more than seventy-five businessmen and women arrived to Capitol Hill to make their case to regulators and other officials. There was little coverage of the event, other than a one-sentence Politico newsletter item claiming that this lobbyist-led trip was an example of a trade group “[hitting] the hill for small investors.”

But rather than going to bat for mom-and-pop retirees or other small investors, the day-long event on the hill was actually the latest salvo in a three-year campaign by brokerage firms to block regulations that would ensure that advisers to your 401(k) work in your best financial interest, or in other words, as your fiduciary. The Financial Services Institue, a trade association for broker-dealers, organized the trip, which included representatives from Pershing, FSC Securities, TransAmerica and other industy leaders.

While many Americans rely on 401(k) plans for their retirement, few are aware that their financial advisers are often working for commissions, and have no legal obligation to have their clients’ best interests in mind. The vast majority of 401(k) advisers, around 85 percent, are not actually fiduciaries. Critics say brokers often steer small investors into funds that may not be suitable, or are burdened by an array of high fees.

Since 2010, the Labor Department has proposed rules that would broaden the definition of fiduciary to “anyone who provides investment advice for a direct or indirect fee to retirement plans or holders of an individual retirement account,” according to PBS’s Frontline. The Frontline story shows how many Americans with 401(k) plans are reaching retirement with far less money than they anticipated because they have been prodded by their advisers into funds riddled with fees and other penalties that have eaten away at their nest egg. In many cass, as a report by The Nation Institute’s John Wasjik documented, retirees are encouraged to place their savings into risky funds sold to them as “similar to a CD” in terms of safety. Many retirees who have spent much of their careers saving through their 401(k)s are now taking up jobs well into their 60s and 70s just to get by.

The broker-dealer industry was swift with its attacks on the fiduciary rule.

Financial giants like Fidelity and Bank of New York Mellon Corporation were joined by corporate-funded fronts like the Competitive Enterprise Institute in lobbying the Labor Department. A lobby organization for brokers involved with the campaign says that it helped generate 5,000 letters to the White House, conducted 260 meetings with congressional representatives from both parties and “coordinated” letters from thirty House Democrats and fifty-five House Republicans urging then–Labor Secretary Hilda Solis to drop the rule. One of the leaders of the Democratic mobilization against the rule, Representative Carolyn McCarthy (D-NY), was later feted with a breakfast fundraiser by the Council of Insurance Agents and Brokers.

In September of 2011, the rule was retracted to be reworked. Fortunately for 401(k)-holders, the Labor Department says that it will re-propose the rule earlier this year. And as expected, the lobbying against the rule has heated up.

Congresswoman Ann Wagner (R-MO) sponsored a bill that would add new layers of red tape to the rule, potentially pushing it back for many years. The bill was opposed by the AARP, the Consumer Federation of America, and several other groups who said it will “leave American investors with significantly less protection.” Nevertheless, Wagner’s legislation passed the House Financial Services Committee last month with bipartisan support.

Although second-quarter lobbying disclosures are still trickling out, it’s clear big brokerage firms are helping to battle the re-proposed rules. Charles Schwab and Co. spent at least $50,000 alone helping to pass Wagner’s legislation. When the rule was debated in 2011, Columbia Financial Advisors, Fidelity, the Financial Services Roundtable, John Hancock Financial, AXA Financial, Ameriprise, Allianz of America, MetLife, Charles Schwab, LPL Financial, Hartford Financial, TD Ameritrade, and other financial firms spent several millions lobbying the federal government on the issue, according to lobby disclosures filed with the Senate.

John Wasik, a in a recent piece explaining how Wagner’s bill would tie down the Labor Department rules, says the effort “channels the spirit of Bernie Madoff” by subverting real investor protection.

Its still unclear if the fiduciary rule will go the way of so many other financial regulation reforms that have been watered down to oblivion, tied up in litigation, or simply pushed to the side because of industry pressure.

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