Obama presses new rule for broker advice on retirement investments – Reuters


WASHINGTON (Reuters) – President Barack Obama will direct
the Department of Labor on Monday to proceed with new rules that
would rein in conflicts of interests among Wall Street brokers
who advise clients on retirement investments, administration
officials said.

The change would mandate that brokers follow a “fiduciary
standard” to prioritize clients’ interests over brokers’
interests, they said. The proposal is opposed by many
Republicans and financial firms, which are fearful that the plan
will limit broker compensation.

The move would cut back on “hidden fees” that financial
advisers can pocket when steering clients into more expensive
products that may not be the best option for the investor,
officials said. Such practices cost working- and middle-class
families $17 billion a year, according to the White House.

“The president will call on the Department of Labor to
establish updated rules of the road to make sure that
responsible Americans who are saving for retirement are getting
a fair share of returns on their savings,” Jeff Zients, Obama’s
top economic adviser, said in a conference call with reporters
on Sunday.

The push for tighter rules fits into Obama’s message of
championing the middle class, a theme that is likely to dominate
the 2016 presidential campaign. Obama will unveil his proposal
during remarks hosted by the Association of American Retired
Persons (AARP), which, along with labor and consumer advocacy
groups, has lobbied for the rule change.

Seniors are an important voting bloc for both parties.

Massachusetts Senator Elizabeth Warren, a consumer advocate
who some Democrats hope will challenge former Secretary of State
Hillary Clinton for the party’s presidential nomination, is
expected to attend.

The industry fears a rule change would curb compensation for
brokers and would limit the types of investment products
investors can get. Fierce lobbying by the industry forced the
Labor Department to scrap its original proposal a few years ago.

“This re-proposal could make it harder to save for
retirement by cutting access to affordable
advice and limiting options for savers,” said Ken Bentsen,
president of the Securities Industry and Financial Markets
Association, which represents banks and assets managers.

Daniel Gallagher, a Republican member of the Securities and
Exchange Commission, chided the White House last week for
circulating baseless “propaganda” to rally support for the
change.

The Labor Department has been working for several years to
overhaul its rules governing how advisers provide advice to
clients in workplace retirement plans such as 401(k)s and
individual retirement accounts.

The department wants to hold these advisers to the high
“fiduciary” standard that would put clients’ interests first.
Currently, many advisers on Wall Street are only required to
suggest products that are “suitable” to investors.

A first draft of the plan generated stiff opposition from
Wall Street and prompted the U.S. House of Representatives to
pass bills trying to delay or kill the rule-making.

The department was forced to scrap the draft and come up
with a new one.

Secretary of Labor Tom Perez said the proposal would be
published in the coming months and be open to a comment period.
He said feedback from the previous failed attempt at reform had
informed the process.

“We expect that the proposed rule will not ban commissions
or any common compensation practices, and it will allow
financial advisers to continue providing general education on
retirement savings,” he said, citing some of the differences
with the previous proposal.

Obama presses new rule for broker advice on retirement investments – Reuters

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