Investment Professionals

In Historic Win for Consumers, Department of Labor Finalizes Rule to Strengthen Protections for Retirement Savers

Washington, D.C. – Later today, the Department of Labor plans to formally announce completion of its conflicts of interest rule to strengthen protections for workers and retirees who turn to financial professionals for advice on how best to save and invest for retirement. Years in the making, the rule is designed to ensure that all financial professionals who offer retirement investment advice act in their customers’ best interests. Based on a review of materials released by DOL in advance of the formal announcement, CFA’s Director of Investor Protection Barbara Roper and Financial Services Counsel Micah Hauptman issued the following statement:

On the need for the rule:

“Average Americans who scrimp and save to afford an independent and secure retirement should be able to trust that the financial professionals they turn to for advice will act in their best interests,” said CFA Director of Investor Protection Barbara Roper. “For too long, however, loopholes in the regulations governing advice to retirement investors have denied workers and retirees that basic protection at a cost of billions in diminished retirement savings. We applaud the DOL for persisting in the face of relentless and well-funded opposition to deliver this much needed market reform.”

On the rule itself:

“While we will conduct a more detailed analysis of the rule over the coming days and weeks, our initial review indicates that the rule is a huge win for consumers. It appears that the rule properly closes the loopholes in the current rule so that financial professionals can no longer evade their obligation to serve their customers’ best interest, appropriately applies to recommendations to roll over to an IRA, which is often the time at which retirement savers have the most money at stake and are most vulnerable to being preyed upon, and has a strong, legally enforceable best interest standard backed by requirements for firms to rein in toxic and often perverse compensation practices that reward financial professionals for working against their customers’ best interests,” said CFA Financial Services Counsel Micah Hauptman. “As a result, this rule will lead to better outcomes for retirement savers and bring them one step closer to a secure and dignified retirement. At the same time, the DOL has offered a balanced approach that reflects considerable input from a variety of stakeholders.”

On industry’s opposition to the rule:

“With billions of dollars in excess fees at stake, industry has shown it will stop at nothing to defeat this rule, and we don’t expect them to relent simply because the rule has now been finalized,” Hauptman said.  “Indeed, industry was already planning a legal challenge before they saw the final rule.”

“The rule rewards firms that are prepared to compete by offering high quality services and investments at a reasonable price,” Roper said. “We remain hopeful that some of the more responsible industry members who are comfortable competing on this basis will seize this opportunity to separate themselves from the herd and move forward quickly to implement this rule. Firms that take the lead in embracing a strong fiduciary standard stand to benefit both their customers and themselves.”

Contact: Barbara Roper, 719-543-9468; Micah Hauptman, 202-939-1004

CFA is an association of more than 250 nonprofit consumer groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.