From the White House:
A new report from the President’s Council of Economic Advisers shows that that the current, broken regulatory environment creates misaligned incentives that cost working and middle class families billions of dollars a year-with some individual families losing tens of thousands of dollars of their retirement savings. These incentives cause some Wall Street brokers to encourage working and middle class families to move from low-cost employer plans to IRA accounts that typically entail higher fees-and to steer working and middle class families into higher-cost products within the IRA market. Many advisers currently act as fiduciaries and provide advice in their clients’ best interest, but many others do not. […]
Today, the President called on the Department of Labor to crack down on Wall Street and protect families from conflicted and bad retirement advice. DOL will move forward with a proposed rulemaking that would require retirement advisers to abide by a “fiduciary” standard-putting their clients’ best interest before their own profits.
The president spoke to the AARP on Monday:
… while we’ve come a long way, we’ve got a lot more work to do to make sure that the recovery reaches every single American out there and not just those at the top. That’s what I’ve been calling middle-class economics — the idea that this country does best when everybody does their fair share, and everybody gets a fair shot and everybody is playing by the same set of rules.
And that last part — everybody playing by the same set of rules — is why we passed historic Wall Street reform that put in place smarter, tougher, common-sense rules of the road to protect consumers and to end taxpayer-funded bailouts. […]
Today, we’re going to build on these consumer protections for the middle class by taking a new action to protect hardworking families’ retirement security. Because, in America, after a lifetime of hard work, you should be able to retire with dignity and a sense of security.
And in today’s economy, that’s gotten tougher. Most workers don’t have a traditional pension. A Social Security check often isn’t enough on its own. […]
… the challenge we’ve got is right now, there are no uniform rules of the road that require retirement advisors to act in the best interests of their clients — and that’s hurting millions of working and middle-class families.
(Full transcript: Remarks by the President at the AARP)
FACT SHEET: Strengthening Retirement Security by Cracking Down on Backdoor Payments and Hidden Fees
A system where Wall Street firms benefit from backdoor payments and hidden fees if they talk responsible Americans into buying bad retirement investments-with high costs and low returns-instead of recommending quality investments isn’t fair. These conflicts of interest are costing middle class families and individuals billions of dollars every year. On average, they result in annual losses of 1 percentage point for affected investors. To demonstrate how small differences can add up: A 1 percentage point lower return could reduce your savings by more than a quarter over 35 years. In other words, instead of a $10,000 retirement investment growing to more than $38,000 over that period after adjusting for inflation, it would be just over $27,500. Today, President Obama is taking a step to crack down on those Wall Street brokers who benefit from backdoor payments or hidden fees and don’t put the best interest of working and middle class families first.
Many advisers do not accept backdoor payments or hidden fees and work on a different business model that puts their customers’ best interest first. They are hardworking men and women who got into this work to help families achieve their dreams and want a system that provides a level playing field for offering quality advice. But outdated regulations, loopholes, and fine print make it hard for working and middle class families to know who they can trust.
Find out more at http://dol.gov/ProtectYourSavings
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