July 3, 2015
What the Labor Department’s New Ruling Means for Your Retirement
Banks and financial institutions across the country are on tinder hooks as they await the unveiling of a new Department of Labor (DOL) Fiduciary Ruling. The Department of Labor is revamping the old version of the proposed fiduciary rule that has languished for years in the annals of Congress.
This latest attempt aims to reduce conflicts of interest for brokers working with clients in 401(k) or individual retirement accounts. The agency said the rule, proposed in April, is designed to prevent brokers from inappropriately putting investors into high-fee products that eat away at their retirement savings.
The proposed rule would require a “best interest standardâ€ across a broad range of retirement advice, thereby expanding the types of retirement advice covered by fiduciary protections. That means that any advisor receiving payment to provide individualized advice (such as which assets to purchase or sell, or whether to roll over a 401(k) plan balance into an Individual Retirement Account, for instance), would be a fiduciary and therefore compelled to put clients’ interests first.
Current loopholes in the retirement advice rules have allowed some brokers and other advisers to recommend. A White House Council of Economic Advisers analysis estimated that broker/consumer conflicts of interest result in annual losses of about 1 percentage point for affected investors–or about $17 billion a year in total. The median wealth of black households dropped an astonishing 34 percent from 2010 to 2013, according to Pew’s analysis of Federal Reserve data. White household wealth grew slightly over the same period. Median white household worth was $141,900, while the median black household was worth just $11,000.
The U.S. financial landscape is pockmarked with financial advisors ready with products and schemes that put their own profits ahead of their clients’ best interest, strangling millions of American workers and their families. The U.S. financial industry has long played fast and loose with the savings of unwitting investors is rife. From the stock market crash of 1944 to Bernie Madoff’s reprehensible Ponzi scheme that gutted retirement savings and various and sundryÂ investment schemes that have gutted pensions and retirement, it is evident that policies are need to protect the savings average American workers. savings of millions of hard working Americans that this would be a cinch. But not so fast.
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