President Barack Obama called for a new fiduciary standard proposal from the Department of Labor to protect middle-class retirement savers that he said are being hurt by some advisers' conflicts of interest.
The DOL's proposal was sent to the Office of Management and Budget Monday for regulatory review before it can be formally proposed, which should happen “in a matter of months,” Mr. Obama said.
Speaking at the AARP's Washington headquarters Monday, Mr. Obama said “the rules governing retirement investments were written 40 years ago. … Today, I am calling on the DOL to update the rules.”
Mr. Obama said that while many financial advisers do put their clients first, “there are no uniform rules of the road that require retirement advisers to act in the best interests of their clients.” “Just because we've proposed this new rule doesn't mean that it becomes law. There are also some special interests that are going to fight it with everything they've got,” Mr. Obama said. “What I won't accept is the notion that there is nothing we can do.”
Once the proposed rule is released, the DOL will seek extensive public comment. There will be a new exemption that will allow firms to keep their compensation practices, such as commissions and revenue sharing, as long as clients' interest come first and potential conflicts of interest are disclosed.
The Committee on Investment of Employee Benefit Assets commended the president's push to strengthen retirement security, saying in a statement that its members, who represent large corporate benefit plan sponsors, “are concerned about harmful conflicts of interest, particularly in the aggressive marketing of IRAs to 401(k) plan participants when they leave employment. … CIEBA believes that participants deserve unbiased advice and that anyone providing advice on investing 401(k) assets should be held to the same standards as plan sponsors.”