At a briefing hosted by AARP yesterday, I had the privilege of watching President Obama announce his support for a proposed rule to put a brake on conflicts of interest in investment advice for retirement accounts. The event set the stage for the release of the Department of Labor’s (DOL) fiduciary rule to the Office of Management and Budget (OMB) for review – an important first step in ensuring that brokers and others who give advice on 401(k)s and IRAs do so in their clients’ best interests.
Before an audience of 100, including representatives of the organizations affiliated with SaveOurRetirement.Org, President Obama stood up for the retirement security of middle-class workers and retirees. He said, “If you’re working hard, if you’re putting away money, if you’re sacrificing that new car or that vacation so you can build a nest egg for later, you should have the peace of mind of knowing that the advice you’re getting for investing those dollars is sound, that your investments are protected, that you’re not being taken advantage of.”
He translated the importance of the fiduciary rule into plain English, saying, “Right now, there are no uniform rules of the road that require advisors to act in the best interests of their clients — and that’s hurting millions of working and middle-class families.”
To solve this problem, the President called on the Department of Labor to “update the rules and requirements that retirement advisors put the best interests of their clients above their own financial interests.”
This is common sense.
Before President Obama spoke, other officials reinforced the importance of this proposed rule to protect people’s savings from bad investment advice. Labor Secretary Tom Perez said, “When you go to a doctor, you expect advice in your best interest.” He warned that the “corrosive power of fine print, hidden fees and conflicted advice can eat away like a chronic illness at people’s hard-earned money…We need to fix it.”
Senator Corey Booker (D-NJ) continued the metaphor, saying that financial advisors “should have standards of care that must be met just like doctors and lawyers.” Senator Elizabeth Warren (D-Mass.) called the release of the rule “a way to begin to fix a broken system.” She noted that there are many honest advisors, but there is a need to stop “the kick-backs, the fancy cars, and other incentives some financial advisors are given to sell lousy products.” Congressman John Delaney (D-Md.) and Richard Cordray, director of the Consumer Financial Protection Bureau, also spoke in support of the rule.
Jo Ann Jenkins, CEO of AARP, said, “In today’s world it’s hard enough to save for retirement and achieve your financial goals. We don’t need to make it more difficult by allowing some in the financial industry to take advantage of hardworking Americans. All advice should be in the best interest of the consumer. Bad financial advice is just wrong — period.”
What happens next? The Office of Management and Budget has up to 90 days to review the rule. Once approved by OMB, DOL will publish the proposed rule and open it up for public comment.
See photos from the event on our Facebook page.