Their advice could move away from riskier investments. But it would increase to just $179,000 with conflicted advice, the administration said. The Department of Labor has proposed new rules to ensure that retirement experts have their clients’ best interests at heart.
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DOL Secretary Thomas Perez said Tuesday that the final regulation was a “streamlined” version of the department proposal.
“We listened, we learned, we adjusted”, he said, “and you’ll find that in the final rule”.
Some advisers already follow guidelines required to serve the customer’s best interest – called the fiduciary standard – but many advisers follow the so-called suitability standard. For example, Elaine and Merlin Toffel of IL relied on a broker at their local bank branch to help them manage their retirement funds, but the broker recommended converting low-priced investments into high-cost variable annuities with negative tax consequences along the way.
The new rules were the target of heated lobbying campaigns mounted by both the financial industry and consumer advocates.
Isakson wouldn’t commit to a timeline for when the Senate might consider his disapproval resolution, which is a common strategy Congress employs to protest administration actions they oppose, such as the Environmental Protection Agency’s “waters of the United States” rule. And a broker may have to tell you when they have a conflict of interest with regard to a financial product like receiving fees that could prevent them from putting your interest first in recommending it.
“While the DOL deserves so much credit for taking the lead on this crucial issue while the Securities and Exchange Commission twiddles its thumbs, there are some serious issues with its rule”, said Andrew Stoltmann, a plaintiff’s attorney with an eponymous law firm. “No real fiduciary could do this”.
Insurers will be given greater latitude than initially forecast in selling proprietary products, such as annuities, under the final DOL fiduciary rule.
These sorts of activities have been at the crux of numerous problems and abuses seen in litigation and arbitration against brokerage firms over the years, Mr. Stoltmann said. As we have said since day one, there is no compelling evidence this rule is necessary to achieve a uniform fiduciary standard, and the DOL’s own analysis fails to make the case. It has the potential to deliver significant benefits to middle-income Americans in a time of slow wage growth, when many people have trouble setting money aside for retirement in the first place.
Of course, Swensen says, some financial advisers do right by their clients. But they were paying commissions and/or higher internal product costs.
“We might have to revisit that”, he said on Wednesday after reading initial information about the rule.
One of the biggest adjustments was giving advisers a full year to revamp their systems, up from a proposed eight-month implementation period. She explains that many fiduciaries use an oath, and if an advisor is unwilling to sign it, it could be a good sign to keep walking.
“If you need more assistance than [basic options], you’re gonna get mad when you can’t get the support you want”, argues Jill Hoffman of the Financial Services Roundtable, an advocacy group for the industry.
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The financial industry maintains the new requirements for brokers will likely reduce investors’ choices of financial products and could cause brokers to abandon retirement savers with smaller accounts.
