This week President Obama directed the Department of Labor to protect families from "conflicted" retirement counsel provided by financial advisors. The Department will kick off a rulemaking process requiring all retirement advisors to abide by a "fiduciary," or trust standard.
Gary Kalman, Executive President for Federal Policy commented on the proposed action:
When you walk into a bank to set up an IRA or set aside money in your company's retirement plan, you should be able to trust that the person offering advice is considering what's best for you. When an advisor says: 'trust me,' it should mean something. Under today's rules, many financial advisors receive the equivalent of kick-backs to place people into high-cost funds without regard to the needs of the investor or consideration of the performance of the fund. It is wrong and it is costly, as much as $17 billion in fees each year.
There are similarities here to the kick-backs once received by mortgage brokers to steer homebuyers into higher cost loans. That deceptive practice has, thankfully, been banned. The rationale for the rules is quite simple: Those who you pay for advice should have a responsibility to give you advice that is free of conflicts. It should be in your best interest, not theirs.
We look forward to working with the Administration to ensure that those who save for retirement receive sound advice that puts their long-term interests ahead of any other.
For more information, contact Millree Williams in DC at 202-349-1884 or millree.williams@responsiblelending.org.