Yesterday was the due date for comments on a rule proposed by the U.S. Department of Labor that would protect people with 401(k)s and IRAs from conflicts of interest in the financial services industry.
AARP filed our official comments yesterday, one on the new rule and one on the new proposed best interest contract exemption.
The rule, proposed in April, requires all retirement plan advisers to provide advice in their clients’ best interest. That is the simple goal underlying the new rule. And why not? You’ve worked hard your entire life. You’ve put away money for a secure retirement for years. And now, after a lifetime of saving, you are looking forward to a secure retirement —
whether it’s more time with the grandkids or finally taking the time to travel.
But what if one day you discovered that, over the years, 25 percent of your savings had trickled right out of your pocket? Forget a secure retirement — will you even have trouble making ends meet?
It sounds like a nightmare scenario, but it’s a real concern thanks to loopholes in the law that allow some financial advisers to give investment advice that earns them a higher fee — even if it’s not the best advice for you.
And for the 82 million households who are counting on employer-sponsored plans or IRAs for their retirement security, this loophole could mean losing nearly a quarter of their hard-earned savings over their lifetimes.
This is unacceptable. It’s time to require all retirement investment professionals to act in their clients’ best interest. The current confusion is not just bad for retirement investors, it’s bad for those advisers who already meet the higher fiduciary standard.
AARP members from every state have signed nearly 70,000 petitions to the Department of Labor in support of “closing the loophole.” The next step is a public hearing at the Department of Labor the week of Aug. 10, at which AARP has requested to testify. The comment period will then reopen for a few weeks after the hearing transcript is published — a process that will provide more time for public comment.
Thank you to everyone who has submitted a petition so far. We will keep you informed as we fight for a rule that will ensure all retirement plan advisers act in the best interest of the investor. We want to ensure all hardworking American families can count on the advice they need to achieve a more secure retirement.
Follow me on Twitter @DavidCertner for the latest updates on what’s happening in Washington on the issues that matter most to older Americans.