Washington, D.C., September 17, 2014 – Millions of hardworking Americans who have spent years saving for retirement are receiving financial guidance from professional advisers who are not obligated to act in the best interest of their clients, resulting in a huge drain on retirement savings for many workers and retirees, wrote a group of leading public interest organizations in a letter sent today to members of Congress and officials in the Obama administration.
Those advisers are often permitted to recommend investments that come with high fees, poor returns, and even substantial risks because they have no fiduciary duty to their clients. This behavior will continue unless the U.S. Department of Labor completes its work updating the 40-year old fiduciary duty rule that governs those who advise retirement plans and plan participants, the group argued.
The Department of Labor, under the leadership of Secretary Thomas Perez and Assistant Secretary Phyllis Borzi, has been working hard “to update and strengthen the outdated protections that apply when individuals receive professional advice about their retirement investments. The DOL’s fiduciary duty rule was adopted in 1975 and has not been updated for almost 40 years, notwithstanding enormous changes in the way Americans save and invest for retirement. Traditional defined benefit plans offered by employers have been largely replaced by IRAs and 401(k)’s (which did not exist 40 years ago),” wrote the group. “As a result, most workers can no longer rely on professionally managed pensions to guarantee a secure retirement. In addition, workers and retirees must choose from a large variety of investment options, many of which are difficult to understand.”
Under the outdated rule, which was adopted during the Ford administration, Americans have paid a heavy price, “amounting to tens or even hundreds of thousands of dollars in lost retirement income – as a consequence of the status quo which permits trusted financial advisers to profit at their clients’ expense,” said the group.
If the DOL completes its updated fiduciary rule, it will finally ensure that all those who provide investment advice to retirement accounts are required by law to act in the best interest of their clients. “There is a substantial public interest in ensuring the largest possible share of retirement savings goes to the saver, without unnecessarily high sums being siphoned off or redirected to advisers with conflicts of interest . . . Action by the DOL to update and strengthen the protections that apply when individuals receive advice about their retirement investments has the potential to deliver concrete benefits to millions of workers, investors, and retirees – all at no cost to the US treasury or taxpayers,” explained the group.
At the very least, the DOL “should proceed with its rulemaking, allowing stakeholders to evaluate the rules on their merit when the regulations are reproposed,” concluded the group.
The full text of the letter can be found here.
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AARP is the largest nonprofit, nonpartisan organization representing the interests of Americans age 50 and older and their families. To learn more, visit www.AARP.org. AARP Media Contacts: Dave Nathan or Josh Rosenblum, (202) 434-2560, media@aarp.org, @AARPMedia
The AFL-CIO is the country’s largest labor federation and represents 12 million union members and retirees. For more information, visit www.aflcio.org. Media Contact: Amaya Smith. (202) 637-5018, Asmith@aflcio.org.
AFSCME’s 1.6 million members provide the vital services that make America happen. With members in hundreds of different occupations — from nurses to corrections officers, child care providers to sanitation workers — AFSCME advocates for fairness in the workplace, excellence in public services, and prosperity and opportunity for all working families. Media contact: Cheryl Kelly, (202-429-1136), CKelly@afscme.org
Americans for Financial Reform is a coalition of more than 200 national, state and local groups who have come together to work for a safer, fairer, simpler financial system. Members of our coalition include consumer, civil rights, investor, retiree, community, labor, faith based, and business groups. Media Contact: Jim Lardner, (202) 466-3311, jim@ourfinancialsecurity.org
Better Markets is an independent, nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets. Better Markets advocates for transparency, oversight, and accountability with the goal of a stronger, safer financial system that is less prone to crisis and failure thereby eliminating or minimizing the need for more taxpayer funded bailouts. To learn more, visit www.bettermarkets.com. Media Contact: Alex Formuzis, (202) 618-6430, aformuzis@bettermarkets.com
Consumer Federation of America is a non-profit association of more than 250 national, state, and local pro-consumer organizations. It was formed in 1967 to represent the consumer interest through research, advocacy, and education. To learn more, visit www.consumerfed.org. Media Contact: Barbara Roper, (719) 543-9468, bnroper@comcast.net
The Pension Rights Center is a nonprofit consumer organization committed to protecting and promoting the retirement security of American workers, retirees, and their families. To learn more, visit www.pensionrights.org. Media Contact: Nancy Hwa, (202) 296-3776, nhwa@pensionrights.org.
