Labor Secretary Tom Perez told a Senate panel Tuesday that the government was committed to cracking down on retirement financial advisers who give their clients bad advice, saying that he was convinced that a proposed new rule to make them legally liable had been carefully crafted.

The rule is set to be completed later this year.

"[W] have probably found the right middle ground in providing greater consumer protection in a way that respects the important role played by investment advisers in helping the middle class achieve the American dream of a secure retirement," Perez told a Senate Health, Education Labor and Pensions Committee panel.

The rule would require advisers to disclose any commissions they might receive from selling them certain retirement plans and make them legally liable for their clients' losses. Perez rejected criticism from Republicans and business groups that the proposed rule, which ran 120 pages, was overly broad and that his department was the wrong agency to enforce it.

Currently, there is no legal requirement that advisers put the client's best interests first. They are merely required to make recommendations that are "suitable." Critics of the current rules, including Perez, argue that that standard does not do enough to protect clients from potential conflicts of interests the adviser may have. He said the bad advice costs clients an estimated $17 billion a year and the proposed rule would boost the clients' returns by $4 billion annually.

"We know that advisers can live up to a best interest standard and still make a living because so much of the industry already does just that," Perez said.

Republican lawmakers on the committee were not convinced. Sen. Bill Cassidy, R-La., noted that the United Kingdom put similar rules in place in 2013 only to see banks stop lending to people with less than $80,000 in assets. Perez conceded that some U.K. clients were dropped by their advisers but said more clients overall were taken on after the rule passed.

Cassidy also noted that while the department had pegged the cost of the rule to financial advisers at $2.4 billion-$5.7 billion over the next decade, a report by financial advisory firm Deloitte put it at $15 billion. Perez said he was confident of the department's figures.

Brookings Institution fellow Robert Litan said the cure was potentially worse than the disease. He estimated the proposed rule's net harm to investors at $1 billion-$3 billion annually due to advisers simply dropping them as clients rather than faced expanded liability. He also disputed Perez's claim that investors suffer $17 billion in losses annually due to bad advice, saying that was based on a "flawed reading" of the existing research.

Litan said the Labor Department should drop its proposal and instead work with Financial Industry Regulatory Authority Inc., an independent nonprofit, to come up with new rules that the nonprofit could enforce.

"The notion that all retirement investment advisers should be held to a 'best of the client standard' is not controversial. It's the way we enforce it [that's at issue]," Litan said. "Should we enforce it with potential class-action litigation? Or by the body we already have established to oversee the brokerage industry, which is FINRA?"

Peter Schneider, president of Primerica Inc., a financial advisory firm, testified that the rule could render most existing portfolios with less than $25,000 in assets illegal, which would be more harmful to investors than the bad advice some receive.

"We all agree we must act in the best interests of the client, but inadequate retirement savings is the overriding issue facing the middle class and this rule is another obstacle [to that]," Schneider said.