If you have a 401(k) or other retirement plan, you may be waiting even longer before new government standards are imposed that require your financial adviser to act in your best interest.
The U.S. Department of Labor was in the final stages of preparing a proposal that would establish a so-called fiduciary standard for retirement plan advisers, which means they'd be required to put their clients' financial interests ahead of their own when offering investment advice. A number of consumer groups support the effort, including AARP, the Consumer Federation of America (CFA) and the Pension Rights Center.
However, the DOL's timetable to release the proposal for public comment-it was scheduled for August-may be delayed because 30 House Democrats, in a letter, requested to meet with Labor Secretary Thomas Perez first. The lawmakers say they're concerned that the proposal to raise investment advice standards for retirement plan advisers could hurt people with modest assets.
A DOL spokesman confirmed that Perez had received the letter, but declined to say whether the lawmakers' concerns would ultimately delay the proposal's release.
The DOL isn't going to issue something that blocks people with modest means from getting professional advice that's in their best interest, says Barbara Roper, director of investor protection for the CFA. "The DOL has given us every reason to believe that it's fully aware of these concerns and it's not going to back down from writing the rule."
She said the financial services industry is "lobbying hard" against raised standards for advisers. "It'd be nice if a few members of Congress would write to DOL or any of the regulatory agencies and urge them to write a rule that best protects investors and makes sure their interest are served."
Mary Wallace, a legislative representative at AARP, calls the need for a higher fiduciary standard "a no-brainer." She says the Employee Retirement Income Security Act of 1974 was enacted to oversee such standards and hasn't been expanded since.
"The market is a whole new world from the way it was almost 40 years ago," Wallace says. "Whoever heard about IRAs? There are more players and products now and the current [regulatory] umbrella doesn't cover all of them. It isn't right and it puts people at risk. It is essential that this rule be upgraded."
The letter by the New Democrat Coalition said in part: "Before you send any proposal to the Office of Management and Budget, we respectfully request the opportunity to have a dialogue on how to best protect low- and middle-income individuals and small business, while ensuring access to investment education, information, and affordable investment products and services." It was signed by Reps. Rush Holt (N.J.), Carolyn McCarthy (N.Y.), Ron Kind (Wis.), Patrick Murphy (Fla.) and 26 other House Democrats, according to Investment News.
The forthcoming DOL proposal is actually a "re-proposal." The original one was released for public comment and withdrawn in 2011 so it could be amended to reflect some of the feedback from the financial industry and others, a DOL spokesman said.
The DOL has said it's trying to protect workers and retirees who rely on 401(k)s and IRAs as their nest eggs from advice that may be unsuitable. The fiduciary standard means that professionals who recommend an investment for their clients must do so because it's in the clients' best interest, not because they'd gain a huge commission from it.
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