Barack Obama, Thomas Perez

President Barack Obama, right, and Labor Secretary Thomas Perez say Americans deserve retirement-investment advice that is free from conflicts of interest. Republicans say the administration's new rule will backfire.

(Susan Walsh, Associated Press)

WASHINGTON -- Congressional Republicans drew clear lines this week in a matter that could affect millions of retirement savers: whether to require financial pros to give advice that is free from conflicts of interest.

Senate Republicans introduced legislation to kill that requirement, with a majority of GOP senators signing on. They said that the rule will backfire, scaring small employers and some financial firms from giving to advice to workers and future retirees with meager nest eggs.

Ohio Republican Sen. Rob Portman did not join them, but he previously expressed concern that the conflict-of-interest rule could hurt small savers. His office reiterated that position to cleveland.com today.

Much of this week's action is symbolic, and the White House could veto the legislation easily. Yet the positions of some senators, including Portman, make them certain to be attacked as siding with Wall Street sharks. A similar line of criticism was launched this week on an Illinois colleague.

Ohio Sen. Sherrod Brown, a Democrat, and many in his party say the conflict-of-interest rule will protect consumers and stop Wall Street predators. Some say the alternatives that Portman and others back are too weak or have loopholes.

In the House of Representatives, a key committee voted along party lines Thursday to kill the new conflict-of-interest rule. The only Ohioan on the committee was Rep. Marcia Fudge, a Democrat from Warrensville Heights.

Fudge voted to keep the rule.

What this is all about.

President Barack Obama's administration says its new conflict-of-interest rule, which would take effect in April 2017, would keep advisers and brokers from putting their commissions and profits ahead of the financial interests of Americans who save for retirement in Individual Retirement Accounts and workplace 401(k) accounts.

Conflict-free advice is especially needed, the White House says, when workers prepare to retire and want to roll their workplace 401(k) savings into an IRA.

The lifetime savings often represent a worker's entire nest egg. But for a financial adviser, including those who work for brokerages, mutual fund companies and banks, the nest egg can mean a boost in commissions or fees for themselves or their employers.

Most people providing retirement advice may be honest, but the Department of Labor cites examples of workers being steered into variable-rate annuities or securities with fees that benefited the advisers -- but were inappropriate for the retiree or worker, costing them a share of their hard-earned savings.

How would that happen?

Let's say that over the course of working 35 years, you put aside $10,000 through your workplace. That investment could easily grow to $35,000 after adjusting for inflation. But if an investment fee or commission took just 1 percent off -- a typical loss because of conflicts of interest, according to the White House Council of Economic Advisers -- the savings would be just over $27,500 instead.

Collectively, that's $17 billion in losses to Americans every year, the Department of Labor says.

If you clearly knew the risk, had a bit of financial savvy and were willing to pay higher fees for potentially higher returns, that would be fine. But the chances are that the adviser not only knows much more about investing than you, but also clearly knows which investments provide him or her a higher commission or payout.

You trust the adviser, as you probably should. You know how to repair a car or fix a copier, and the adviser doesn't. But the adviser knows his or her business.

This is where the new rule -- known as the "fiduciary rule" -- comes in. It says that people giving financial advice must put your interests first, just as doctors and lawyers are supposed to under their own rules and codes of conduct. If the adviser doesn't meet that standard, the new rule will make it easier to bring a lawsuit.

All working people deserve access to advice that puts their BEST interest first. This just builds on your work Suze! https://t.co/cKoV4SMHox — Archive: Tom Perez (@SecTomPerez) April 7, 2016

What's wrong with that?

In theory, this might be a no-brainer. How can there be anything wrong with protecting retirement savings?

Congressional Republicans say there isn't.

But they say the rule adds cumbersome reporting and disclosure requirements. They also say that investment regulations should come from the Securities and Exchange Commission, not the Department of Labor.

And they predict the added requirements and fear of litigation will prompt some firms to stop giving free investment advice.

The fiduciary rule could boost business for firms that charge fixed fees and don't make money on commissions, but most ordinary retirement savers don't use fee-based advisers. Instead, they pick up the phone to their employers' 401(k) hotlines, call a mutual fund company's toll-free number or stop in their neighborhood bank.

"Retirement planning is going to be available only to the rich under the Labor Department's so-called 'fiduciary' rule,' because many financial advisers won't risk the new legal liability except for clients with big accounts," Sen. Lamar Alexander, a Tennessee Republican who chairs that chamber's labor committee, said when introducing the GOP's counter-measure.

They're moving quickly

Congress is moving more swiftly than the investment-firm industry, whose trade groups chose to more fully examine the rule for now rather than sue immediately to block it. That's partly because the final rule, released April 6, took into account the extensive comments the industry made leading up to this stage.

The Department of Labor relaxed some paperwork requirements it had proposed earlier. It made clear that many educational and marketing materials would not be considered the same as providing advice. It clarified that companies could continue offering their own, proprietary products without having to also sell their competitors' (as long as they provided certain disclosures). Companies could still sell annuities, but buyers would get a lot more disclosure first, including information of commissions and forfeiture or early exit fees.

Those compromises were too meager, however, for some members of Congress. Under the seldom-used Congressional Review Act, Congress has the power to halt regulations from federal agencies with a simple majority vote on a resolution. Republicans have a majority in both houses of Congress.

Still, the president can veto their resolution if it passes. The White House declined to comment today, but Obama would almost certainly veto this one, and Republicans lack the votes to override a veto.

What Congress did

The GOP moved on two fronts this week. Sens. Alexander and Johnny Isakson of Georgia, chairman of a key Senate labor subcommittee, introduced their chamber's resolution Monday, and they already have three dozen co-sponsors, all Republicans. Presidential candidate Ted Cruz, a senator from Texas, is one of them.

"Like so many of this administration's decisions, their new fiduciary rule harms the very individuals it seeks to protect and prevents those hardworking Americans who are trying to plan for retirement from having the opportunity to access retirement advice," Isaskson said.

In the House, the resolution to kill the rule was introduced Tuesday, and the House labor committee passed it along party lines Thursday. It is unclear when leaders will move the measure to the full House or Senate.

The resolution could easily stop where it is and never get final votes, serving instead as a symbolic measure to let constituents and donors know where lawmakers stand.

How this will play out politically

Either way, the political messages are clear. Heard one way, the message is that Republicans want to make sure ordinary workers and savers can keep getting good advice. Heard another is the view from the Obama White House, a number of Democrats and interest groups including AARP: How can anyone side with Wall Street over retirement savers?

Although Portman has not signed on as a co-sponsor to the new GOP measures, he has backed other legislation that would require advisers to give advice in the "best interest" of the saver -- but wouldn't go as far as the fiduciary rule.

"We need strong protections to ensure that investment advice remains about helping families rather than collecting advisor fees," Kevin Smith, Portman's communications director, told cleveland.com today. "Unfortunately, the White House solution would have the unintended consequence of completely eliminating investment advice for many families and small businesses."

One small factor could help protect Republicans from criticism: Even some Democrats had qualms about the fiduciary rule's requirements before its release. But many of their concerns appeared to have been addressed adequately when the final rule came out.

So consider the case of Sen. Mark Kirk, an Illinois Republican in a tough reelection race. Kirk is a co-sponsor of the Senate measure to kill the fiduciary rule. He wants to protect Americans, he says.

"The federal government should not block longstanding relationships between retirement advisors and the hardworking families across Illinois and the nation who rely on them," Kirk said when signing on as a co-sponsor.

Joining my colleagues to block new @USDOL rule that limits consumer choice & hurts #Illinois families https://t.co/4siNZVJG5m — Mark Kirk (@SenatorKirk) April 19, 2016

But here's the counter-view, from the Illinois Democratic Party this week:

""If Kirk and his Republican colleagues get their way, investment brokers can continue lining their own pockets by giving shady financial advice that unnecessarily steers investors into more expensive funds that charge higher fees."

Expect the same criticism for Portman. David Bergstein, spokesman for former Ohio Gov. Ted Strickland, the Democrat gunning for Portman's job, said today that Portman "is once again prioritizing the agenda of the wealthy and the well connected -- and this time it's at the expense of the retirement security of hardworking Ohioans."