By directing the Department of Labor earlier this week to propose rules requiring all retirement advisers to abide by a “fiduciary,” or trust standard, President Obama is taking another pass at better protecting people from predatory investing tactics.
“The government is concerned about potential abuses by those on Wall Street serving an ERISA plan or advising on related matters, and wants them subjected to the same fiduciary standards as employers” under the Employment Retiree Income Security Act, said Ian Morrison, who co-chairs Seyfarth Shaw’s ERISA & Employee Benefits Litigation Practice Group.
The 1974 federal law expanded the liabilities of people and entities that exercise discretionary authority or control over the management of employee-benefit plans.
Morrison said that, just as in 2010 when similar proposals were made, “a big fight” by brokers and financial advisers dealing with retirement savings would likely ensue during the rule-making process in coming months.
The White House said that a system in which brokers earn money from sales commissions or fees on purchases of mutual funds has created conflicts of interest that cost middle-class families and individuals billions of dollars every year. On average, in has resulted in annual losses of 1 percentage point for affected investors, is said in a press release.
“To demonstrate how small differences can add up: A 1 percentage-point lower return could reduce your savings by more than a quarter over 35 years,” it said. “Instead of a $10,000 retirement investment growing to more than $38,000 over that period after adjusting for inflation, it would be just over $27,500.”
