Retirement Advisers Could Face Tighter Rules

A proposal from the Department of Labor would hold retirement advisers to what's called a "fiduciary" standard. The goal is to protect investors from advisers with a conflict of interest, but financial companies say the change will be costly and could keep many people from getting retirement advice at all.

We'll take a closer look at the proposal with Bob Gallo, AARP Illinois State Director.

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"Our fear is that oftentimes, particularly in this new world order where we all don’t have defined benefit pension plans, folks are now relying more and more on deferred compensation plans or investing in mutual funds,” Gallo told "Chicago Tonight" on Monday during a phone interview. “When you add in things like very high fees or inappropriate fees, that chips away at what an individual ends up with in retirement – or, when broker advisers recommend instruments that are not appropriate for individuals in whatever situation they happen to be in."

That’s not just a problem for individuals, but a problem for the country as a whole.

–Bob Gallo

Gallo says anything that might keep money in the pockets of investors is a step in the right direction. “When we think about the fact that people are living longer, in many cases are going to be retired longer, we’re looking at a retirement crisis here of individuals who could run out money way before their life ends. That’s not just a problem for individuals, but a problem for the country as a whole."

We invited numerous other guests who oppose the Labor Department proposal, but none were able to join us tonight. 

What the Department of Labor says:

Retirement savings are entitled to protection under the law, but those rules don’t apply to every savings plan. With 401(k)s and IRAs, individual investors are more responsible than ever for making important investment decisions, and most don't have the training they need. That means investors are increasingly reliant on the advice they receive. Ideally, your adviser will have your best interest at heart – but that's not always the case.

The U.S. Department of Labor has released a proposed rule that will protect 401(k) and IRA investors by mitigating the effect of conflicts of interest in the retirement investment marketplace. 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 per year in total.

What an opponent says:

The Administration claims that the fiduciary rule is necessary to save small businesses and families from bad advice and protect them from the big, bad financial industry. But most people who are saving for their retirement are happy with the choices they have now on how to access investment advice. I would argue instead that the fiduciary rule puts the government in the driver’s seat, allowing bureaucrats to pick and choose how people invest their paychecks. What we should really be focusing on in this whole situation are the Americans who aren’t saving for a secure retirement adequately, or aren’t saving for retirement at all. We should do everything we can to encourage saving for the future, not passing regulations that will make it harder for people to do so. (Read the full statement.)

–House Ways and Means Oversight Subcommittee Chairman Peter Roskam (R-IL)

Listen to Roskam's entire statement below.

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