The U.S. Department of Labor has released a proposed rule that aims to protect 401(k) and IRA investors from what it views as conflicts and excessive fees by financial advisors.
The measure is expected to be opposed by the financial services industry, which has been battling a number proposals coming out of the Obama Administration.
SIFMA, an association representing the securities industry, issued the following statement from CEO Kenneth E. Bentsen, Jr., on the retirement rule .
“This is a voluminous rule where the fine print matters. We want to ensure it protects investor choice and doesn’t unnecessarily reduce access to education or raise costs, particularly for low and middle income savers. With so much at stake, we will thoroughly review the rule and its impact on investors, and express our views in the public comment period, Bentsen stated. Bentsen took a harder line in a viewpoint column in USA Today. The following is an excerpt:
“Through the development of savings vehicles such as 401(k)s and IRAs, saving and investing in America has been democratized. Yet even with all these options, we still aren’t saving enough. Which is why it’s astonishing that the Labor Department would contemplate a regulation that would remove retirement choices. Unfortunately for many hard-working Americans, Labor’s proposal, no matter how well-intentioned, could worsen the retirement crisis we face today.”
AARP immediately came to the defense of the proposed rule and urged members to offer their support during the comment people.
The issue of fees and conflicts of interest in 401 (K) and IRA investments has taken on added importance as defined benefit plans (pensions) go away at most non-government employers and individuals roll over their 401 (Ks) to IRAs after leaving jobs
A White House Council of Economic Advisers analysis found that these conflicts of interest result in annual losses of about 1 percentage point for affected investors -or about $17 billion a year.
Under the proposals, retirement advisers will be required to put their clients’ best interests before their own profits, according to a Labor Department release.
Financial services companies in Delaware have pieces of the 401 (K) and IRA business.
One of the largest companies involved in the industry, Vanguard, is based in Valley Forge, Pa. and employsh a number of Delawareans. Vanguard has built its business on index funds and low fees.
