A DOL Rule Now Moving to OMB Could Save Workers and Retirees
Billions of Dollars a Year on their Retirement Investments
(February 23, 2015) – Strengthened protections for retirement savers moved one step closer to reality today, when President Obama announced that he was directing the Department of Labor to move forward with a proposed rulemaking to require all financial advisers to act in the best interests of their clients when providing retirement advice.
“At a time when the nation already faces a retirement crisis, gaps in regulatory protections make it all too easy for financial services firms and their so-called advisers to profit at their customers’ expense. They do this by recommending retirement investments that line their own pockets, but expose their customers to excessive costs, unnecessary risks, and substandard performance,” said CFA Director of Investor Protection Barbara Roper. “This slow erosion of retirement investors’ funds can add up to tens or even hundreds of thousands of dollars in lost retirement income over a lifetime of retirement investing. That’s money that the typical middle income worker or retiree cannot afford to lose.”
The rule is expected to expand the circumstances in which financial advisers who provide investment advice to retirement plans, plan participants, and individual retirement account (IRA) investors are required to comply with the fiduciary duty under the Employee Retirement Income Security Act (ERISA) to act solely in their clients’ best interests. The rule is being sent to the Office of Management and Budget for review before being issued for public comment.
“By closing loopholes in the current regulations and subjecting all retirement investment advice to a fiduciary duty to act solely in the best interests of the client, a well-crafted DOL rule has the potential to save millions of Americans billions of dollars each year,” continued Roper. “Financial services firms would still be able to adopt a variety of business models and make a reasonable profit, but not by preying on the lack of sophistication of the average worker or retiree who relies on them for best interest recommendations.”
With so much money at stake, industry has mounted a relentless campaign to try to ensure that this revised rule proposal, and the economic analysis that accompanies it, never sees the light of day. See here for a myth-fact sheet rebutting industry arguments against the rule.
“The war that industry has waged and the factually baseless arguments they have made to try to bottle up this process should really make the public wonder what they have to hide,” said CFA Financial Services Counsel Micah Hauptman. “I imagine it will all be clear when the economic analysis finally comes out, showing in blistering detail the perverse incentives that currently allow financial professionals to extract billions of dollars a year in excess costs from retirement savers.”
While delivery of the revised rule to OMB is just one step in the process, it provides a reason for optimism that industry’s efforts to stifle these regulatory protections have been unsuccessful. Moreover, the strong statement of support from President Obama makes clear that the Administration is committed to making this rule a reality. That is good news for workers and retirees who need to make every dollar count in their efforts to afford a secure and independent retirement.
A myth-fact sheet rebutting industry’s arguments is available here.
For more information, check out the News and Resources section at SaveOurRetirement.org.
Contact: Barbara Roper, 719-543-9468; Micah Hauptman, 202-939-1004
The Consumer Federation of America is a national organization of more than 250 nonprofit consumer groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.