DOL Must Move Quickly to Protect Retirement
Savers from Adviser Conflicts of Interest
A Trump-era rule (that replaced an Obama administration rule) recently went into effect governing retirement investment betrays hardworking Americans saving for retirement and those already retired, says Better Markets.
The Obama administration’s Department of Labor enacted a strong fiduciary duty rule that protected retirees and those saving for retirement from unscrupulous financial advisors, but the Trump administration – prioritizing the profits of the financial industry rather than the best interests of savers and retirees – baselessly killed that rule and replaced it with a very weak rule unsurprisingly supported by the industry. While the Trump rule should be killed and replaced, the Biden administration’s DOL has decided let the rule go into effect for now, but indicated it will be taking additional steps to properly protect retirement savers and retirees.
Why it matters: The rule regulates investment advice for retirement savers with 401(k)s and IRAs. While the Trump rule may provide some limited, minimal protections against some adviser conflicts of interest, the DOL needs to strengthen it dramatically because it fails to come close to adequately protecting Americans’ retirement savings.
What we said: The DOL must move quickly on at least three levels. First, it must promptly develop guidance to strengthen the interpretation of the rule in the short term. Second, it must eliminate the massive loopholes in the related rule defining which advisers are subject to the statutory prohibitions against conflicts of interest. Finally, it must strengthen the exemptive rule by making sure that it establishes a true fiduciary standard, not a watered down “best interest” requirement like the one adopted by the SEC in 2019 for brokers giving investment advice about securities.
Bottom line: The DOL must move quickly on all three fronts so millions of Americans struggling to prepare for retirement can get more protection so that their savings will not be siphoned away as a result of adviser conflicts of interest. Then it must propose a new rule with a clear, strong, and mandatory fiduciary duty that requires all advisers to put their clients’ best interests first. After all, they are investing their clients’ hard-earned money and advisers should not be able to put their economic interests over the best interests of their clients.