When Americans need financial advice or help with their retirement account, they often go to a broker.
But those brokers aren’t all required to disclose potential conflicts of interest.
That could soon change.
The White House is proposing stricter rules on brokers who manage the retirement accounts of Americans; the rules would hold brokers to a “fiduciary standard”, legally requiring them to put their clients’ interests above their own.
Under the “fiduciary standard”, brokers would be required to disclose conflicts of interest, and would be obligated to give sound financial advice based on their clients’ age and risk tolerance.
Registered investment advisors are already held to the “fiduciary standard” and have to register with the SEC.
More from Yahoo News:
President Barack Obama will direct the Department of Labor on Monday to proceed with new rules that would rein in conflicts of interests among Wall Street brokers who advise clients on retirement investments, administration officials said.
The change would mandate that brokers follow a “fiduciary standard” to prioritize clients’ interests over brokers’ interests, they said. The proposal is opposed by many Republicans and financial firms, which are fearful that the plan will limit broker compensation.
The move would cut back on “hidden fees” that financial advisers can pocket when steering clients into more expensive products that may not be the best option for the investor, officials said. Such practices cost working- and middle-class families $17 billion a year, according to the White House.
[…]
Secretary of Labor Tom Perez said the proposal would be published in the coming months and be open to a comment period. He said feedback from the previous failed attempt at reform had informed the process.
“We expect that the proposed rule will not ban commissions or any common compensation practices, and it will allow financial advisers to continue providing general education on retirement savings,” he said, citing some of the differences with the previous proposal.
The Labor Department was weighing a similar proposal in 2010, but it drew outcry from the financial industry and some Republican lawmakers.
This recent proposal has received similar criticism. Banks argue that the rules could actually limit people’s ability to save for retirement by closing off profitable investment paths.
Photo by Diego Cambiaso via Flickr CC License
