Labor Department Pushes for New Fiduciary Rules Governing Financial Retirement Advisors

As the rising tide of baby boomers inches closer to retirement, Labor Department officials are struggling to shore up loopholes in the Employee Retirement Income Security Act (ERISA) that spell out fiduciary duties governing financial advisors.

A new economic study released last week by the White House Council of Economic Advisers seems to validate the Labor Department’s demand for revised fiduciary rules governing financial advisers who provide retirement advice. Although most pre-retirees who seek financial advice from a professional do so with the assumption that their advisor will act solely in their best interest, that’s not always the case under existing laws.

The rules for retirement advisors have not kept up with recent historic shifts away from traditional retirement strategies like 401(k)’s, IRAs and corporate pensions that served the parents of baby boomers so well. While advisors who manage pensions have a fiduciary responsibility to retirement plan participants—that is, they have a legal and ethical duty to act in the client’s best interest when managing their retirement funds—other financial advisors are not legally bound to the same standard. Labor Department officials want to change that.

John Convery, founder of the The Educated Wealth Center in Palm Beach, Fla., says that many pre-retirees don’t understand that not all financial advisors are bound by a fiduciary responsibility to their clients, even when they advertise themselves to be advisers, consultants or specialists. Convery is one of a growing number of financial industry experts working to educate pre-retirees on the changing dynamics of retirement planning by arming them with the knowledge they need to protect their post-career income and lifestyle.

According to proponents of the redraft, there should be no argument over whether the best interests of investors should come first. Without fiduciary responsibilities spelled out, financial advisers have been collecting excess fees and commissions to the tune of $17 billion annually from their clients’ retirement accounts with high-cost products and strategies, when they should have been steering savers toward comparable lower-cost options.

After months of back and forth between Washington, the Labor Department and Wall Street, Americans may be closer than ever to benefitting from rewrites that will close loopholes in fiduciary rules. On Feb. 23, 2015 President Barack Obama endorsed a Labor Department proposal to amend the definition of fiduciary under the Employee Retirement Income Security Act  (ERISA), which will make responsibility to clients’ best interests the standard across the industry board when and if it is adopted.

“The idea of a standard fiduciary responsibility for retirement advisers should be something everyone supports,” Convery says. “And although there is still opposition from some, the general mood is one of hope that these changes will be enacted quickly, making it clear that everyone who gives retirees financial advice are bound by the same client-centric standard.”

Contact Info:
Name: John Convery
Email: Send Email
Organization: The Educated Wealth Center
Phone: (561) 784-7910

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Release ID: 76481