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Financial Advisers Must Put Retirement Savers First, AARP Tells Labor Department

401k text written on wooden block with stacked coins
Nora Carol Photography/Getty Images

En español | AARP submitted comments to the U.S. Department of Labor Jan. 2 calling on the agency to quickly approve a federal rule change that would require more financial professionals to act in their clients’ best interests when advising retirement savers on their investments.

The department’s proposed Retirement Security Rule would close loopholes in 50-year-old regulations that allow some financial advisers to steer retirement plan savers toward products that pay those advisers higher commissions or higher fees or offer other perks — even if those products aren’t the best fit for their clients.

“Every day this continues, many retirees will see their retirement assets eaten away by excess fees and conflicted advice, falling short of potential investment gains if advice had been provided under a best interests standard,” AARP wrote. “And for the most part, the retirees will not even know.”

Under the new rule, these financial advisers would have a “fiduciary duty” to put their clients’ interests ahead of their own — a requirement many savers are surprised to learn does not already exist, David Certner, AARP’s legislative counsel and legislative policy director, wrote in the comments.

A new AARP poll found 89 percent of adults 50 and older expect professional financial advice about their retirement savings accounts to be in their best interest. Ninety percent believe this should be required.

Certner said “conflicted advice” from financial professionals can cost savers up to 20 percent of their retirement nest egg over a lifetime, at a time when the nation faces a retirement savings crisis.

“Policies must be in place to maximize individuals’ retirement accounts, not eat away at them,” he wrote.

The letter echoes concerns Certner raised in testimony before the Labor Department during a hearing on the new rule last month.

AARP has long pushed for tighter rules for financial advice on retirement savings accounts. Speaking at a White House event on retirement security in October, AARP CEO Jo Ann Jenkins called the proposal “a critical step” to better protect Americans’ retirement funds.

Read our comments and learn more about the proposed rule change.

Natalie Missakian covers federal and state policy and writes AARP’s Fighting for You Every Day blog. She previously worked as a reporter for the New Haven Register and daily newspapers in Ohio. Her work has also appeared in the AARP Bulletin, the Hartford Business Journal and other publications.

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