new york
CNN
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As part of our ongoing efforts to make it easier for Americans to save for retirement and help consumers pay less. “Junk” chargesThe Biden administration on Tuesday announced proposed rules that would require financial advisors, brokers and insurance agents who sell retirement investments and advice to do so in the best interest of their clients, not their own. .
“In other words, if a retirement investor receives investment advice from a company or someone else, and the person is compensated for providing that advice, the retirement investor may assume that the person providing the advice “You have a right to expect that the advice provider will act in its own interests, and you have a right to expect that it will not act in its own interests,” the Department of Labor said in a statement. fact sheet on the rules.
Although the fiduciary “best interests” rule is already in place; Retirement Income Security Actwhich manages retirement savings plans; securities and exchange commission, which is responsible for protecting investors when buying and selling securities, includes all types of investment products that retirement savers can sell, including one-time rollovers from 401(k)s. It does not cover any type of retirement savings transaction. to an IRA.
In general, advisors acting in a fiduciary capacity avoid conflicts of interest, whether advising individuals on what to do with their retirement savings or advising an employer on investment options to incorporate into a workplace retirement plan. Have to. That is, their advice should not steer clients toward another product or service based on how much more money they or their company can make from it.
of dollars proposed rule DOL Acting Secretary Julie Su said on a call with reporters that the goal is to “ensure that all retirement investors receive the same quality of investment advice, regardless of product or service.” .
Types of investments that are not subject to the Federal Fiduciary Rule include real estate, commodities, and non-securities such as some types of pensions, which, like employer pensions, can provide retirement benefits to retirees in some circumstances. Or you can provide a fixed stipend for several years. How the product is structured.
pension is an insurance product and is regulated by state law, so the rules vary from state to state. The mechanics can be complicated to understand and the fees can be high.
One of the situations that the proposed fiduciary rule seeks to eliminate is when brokers are sold expensive annuities to individuals that are not optimal for the client’s needs, for which they may receive large commissions. Take the White House, for example. Estimate Without fiduciary standards, the sale of just one such product (a fixed index annuity) could cost retirees up to $5 billion annually.
For all retirement products, “requiring advisors to make recommendations that are in the saver’s best interest can increase returns for retirement savers by 0.2% to 1.20% annually.” White House Facts According to Sheet, this could increase retirement savings by up to 20% over a lifetime, for each affected middle-class saver, that would otherwise be lost to junk fees. That amount could be tens or even hundreds of thousands of dollars. ”
The new proposed rules follow previous efforts by the Department of Labor to expand and standardize the circumstances under which financial advisors must act in the best interests of retirement savers. However, those attempts did not survive judicial challenge.
It is not yet clear whether the changes called for in the latest proposed rule will be enough to quell the opposition faced by earlier versions. But industry pushback is expected, including from the retirement insurance industry’s trade group, the Insured Retirement Institute.
Prior to the announcement of this rule, IRI noted that in recent years, “regulators at the federal and state level have adopted and implemented significant and viable new regulations that directly address the conflicts of interest that the DOL purportedly seeks to address.” “I am doing it,” he pointed out. New rule proposal. ”
As an example, according to IRI, 40 states have already enacted regulations requiring insurance companies to meet Best Interest standards in line with the SEC’s Regulation Best Interest (Reg BI). “And the remaining states plan to do so in 2024,” IRI said.
In response, a senior DOL official told CNN, “That standard does not adequately protect consumers in these areas.” [40] state. We believe that retirement savers are entitled to protections regardless of what state they live in, and this proposal would allow retirement savers to understand the rules under which they operate. There will be no need to understand what is happening; instead, there will be a consistent standard for everyone. ”
After the DOL publishes a proposed rule, there will be a 60-day public comment period after which amendments may be made before the rule is finalized. But there’s no timeline yet for when that will be, officials said.
