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Pension Rights Center Applauds Labor Department’s Release of Proposed Rule on Conflicted Investment Advice to OMB

For Immediate ReleaseContact: Nancy Hwa, 202-296-3776
February 23, 2015www.pensionrights.org
Pension Rights Center Applauds Labor Department’s Release of Proposed Rule on Co

Washington – In a long-awaited move towards protecting millions of workers and retirees by stopping conflicted financial advice in retirement savings plans, the U.S. Department of Labor (DOL) today sent a proposed fiduciary regulation to the Office of Management and Budget (OMB), which now has up to 90 days to review the rule. If approved by OMB, DOL will publish the proposed rule and open it up for public comment. 

“This is a positive step forward towards fixing a loophole that allows financial advisers to enrich themselves at the expense of their clients,” said Karen Friedman, executive vice president and policy director for the Pension Rights Center. “While we haven’t seen the language of the proposed rule, we hope and expect that, after five years of deliberations, the Department of Labor has made much-needed and sensible improvements to ensure that those who give professional investment advice about retirement assets will do so in the employees’ best interests. With 401(k) plans and IRAs increasingly the only retirement plan option available to workers, there is a dire need to ensure that all professional advisers and brokers who recommend investments for retirement money put their clients’ interests first.”

ERISA, the federal law that governs private retirement plans, already states that the people and firms that give investment advice to individuals in retirement plans must work solely in the best interests of those individuals. However, because of a loophole in the law, brokers and others who give advice on retirement money in 401(k)s and IRAs have found ways around these high standards of conduct. As a result, they are able to recommend products that generate higher fees and commissions for themselves – instead of recommending the best products for the person they are advising. Moreover, advisers often recommend that employees who are retiring or switching jobs take a lump-sum benefit from their defined benefit or 401(k) plan and roll the assets over into an IRA, which typically subjects them to higher fees than 401(k) plans and provides them with weaker consumer protections than their employer plan.

A report from the Council on Economic Advisors released today makes the need for an improved fiduciary rule starkly clear, estimating investor losses from conflicted advice to be between $8 billion and $33 billion a year. A White House fact sheet about the issue states that, “despite the significant changes in the retirement landscape, the regulations that set the basic rules of the road on giving investment advice to retirement savers have not been updated in almost forty years. Under these outdated rules, savers cannot count on receiving the unbiased advice that they need and expect.”

The financial services industry has made it a top priority to stop the fiduciary rule from being updated. Intensive lobbying by the industry forced DOL to withdraw a proposed rule in 2011, and industry allies in Congress have tried to pass legislation that would block further attempts to modernize the rule. 

“With a new fiduciary rule advancing to the next step in the process, we expect that the financial industry will ramp up its already-aggressive efforts to obstruct reform. We applaud the Department of Labor for moving ahead to protect consumers, and we call on OMB to review it promptly. We look forward to weighing in on the substance of the rule upon its release for public comment,” Friedman said.

The Pension Rights Center is one of seven organizations that have jointly launched the SaveOurRetirement.org website to educate consumers about the need to close the “retirement advice loophole” and mobilize support for a strong and updated fiduciary rule. The other groups are AARP, AFL-CIO, AFSCME, Americans for Financial Reform, Better Markets, and the Consumer Federation of America. See the SaveOurRetirement.org press release.

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Related:

  • At a briefing for Senate staff on the importance of unconflicted investment advice, retiree Janice Winston told a personal story that illustrates the need for a strong fiduciary standard. - See more at: http://www.pensionrights.org/newsroom/speeches-statements/retiree-janice-winston-speaks-out-support-strong-fiduciary-regulation-0#sthash.YvTNLKvp.dpuf
  • PRC letter to the U.S. House of Representatives opposing H.R. 2374 on fiduciary standards (September 30, 2013) - See more at: http://www.pensionrights.org/newsroom/speeches-statements/prc-letter-us-house-representatives-opposing-hr-2374-fiduciary-standa-0#sthash.qEHMERFP.dpuf
  • A PRC blog entry about President Obama speaking at an event to mark the release of the proposed fiduciary rule (February 24, 2015)
  • A group letter to Congress in support of a strengthened and updated fiduciary rule (September 17, 2014)
  • PRC letter to the U.S. House of Representatives opposing H.R. 2374 on fiduciary standards (September 30, 2013)
  • Retiree Janice Winston speaks out in support of strong fiduciary regulations (September 13, 2013)
  • Norman Stein calls for an end to conflicts of interest in investment advice (September 13, 2013)
  • A PRC blog entry, explaining why H.R. 2374 should be defeated (July 16, 2013)
  • PRC letter to the U.S. House of Representatives opposing H.R. 2374 on fiduciary standards (July 8, 2013)
  • group letter in opposition to H.R. 2374 that was sent to the House in June 2013 (June 18, 2013)
  • Pension Rights Center testimony in support of proposed fiduciary rules (July 26, 2011)
  • Pension Rights Center testifies in support of proposed fiduciary rules (July 26, 2011) - See more at: http://www.pensionrights.org/newsroom/speeches-statements/pension-rights-center-testifies-support-proposed-fiduciary-rules-july-2#sthash.lUiovWLF.dpuf
  • Letter and memo that the Pension Rights Center sent to Congress, expressing support for the proposed regulations (July 20, 2011)
  • The Pension Rights Center's supplemental comments on the proposed regulations (April 12, 2011)
  • Norman Stein's testimony at a Department of Labor hearing on the proposed regulations (March 1, 2011)
  • A PRC blog entry on the importance of the proposed regulations (February 15, 2011)
  • Comments on the proposed regulations to the Department of Labor, submitted jointly by the Pension Rights Center and the National Employment Lawyers Association (February 3, 2011)

Related:

  • At a briefing for Senate staff on the importance of unconflicted investment advice, retiree Janice Winston told a personal story that illustrates the need for a strong fiduciary standard. - See more at: http://www.pensionrights.org/newsroom/speeches-statements/retiree-janice-winston-speaks-out-support-strong-fiduciary-regulation-0#sthash.YvTNLKvp.dpuf
  • PRC letter to the U.S. House of Representatives opposing H.R. 2374 on fiduciary standards (September 30, 2013) - See more at: http://www.pensionrights.org/newsroom/speeches-statements/prc-letter-us-house-representatives-opposing-hr-2374-fiduciary-standa-0#sthash.qEHMERFP.dpuf
  • PRC letter to the U.S. House of Representatives opposing H.R. 2374 on fiduciary standards (September 30, 2013)
  • Retiree Janice Winston speaks out in support of strong fiduciary regulations (September 13, 2013)
  • Norman Stein calls for an end to conflicts of interest in investment advice (September 13, 2013)
  • A PRC blog entry, explaining why H.R. 2374 should be defeated (July 16, 2013)
  • PRC letter to the U.S. House of Representatives opposing H.R. 2374 on fiduciary standards (July 8, 2013)
  • group letter in opposition to H.R. 2374 that was sent to the House in June 2013 (June 18, 2013)
  • Pension Rights Center testimony in support of proposed fiduciary rules (July 26, 2011)
  • Pension Rights Center testifies in support of proposed fiduciary rules (July 26, 2011) - See more at: http://www.pensionrights.org/newsroom/speeches-statements/pension-rights-center-testifies-support-proposed-fiduciary-rules-july-2#sthash.lUiovWLF.dpuf
  • Letter and memo that the Pension Rights Center sent to Congress, expressing support for the proposed regulations (July 20, 2011)
  • The Pension Rights Center's supplemental comments on the proposed regulations (April 12, 2011)
  • Norman Stein's testimony at a Department of Labor hearing on the proposed regulations (March 1, 2011)
  • A PRC blog entry on the importance of the proposed regulations (February 15, 2011)
  • Comments on the proposed regulations to the Department of Labor, submitted jointly by the Pension Rights Center and the National Employment Lawyers Association (February 3, 2011)

- See more at: http://www.pensionrights.org/newsroom/speeches-statements/group-letter-congress-support-strengthened-and-updated-fiduciary-rule-s#sthash.OmzUibli.dpuf

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