Regulation Mandates Financial Advisers Legally Act In Best Interests Of Clients
On Wednesday the Labor Department issued a proposed regulation that requires financial advisers to legally act in the best interests of their clients. The Huffington Post reported the “fiduciary rule” standards “are aimed at cutting down on the unnecessary fees that Americans pay to brokers who advise them on their retirement investments.” According to the White House, it will “address a fundamental conflict of interest within individual retirement accounts, or IRAs – that many brokers, who aren’t legally bound to act in their clients’ best interests, have a financial incentive to shepherd clients toward investments that come with high commissions, regardless of whether it’s right for the customer.” While Treasury Secretary Jack Lew said the new regulations are “an important step toward ensuring that Americans who invest their hard-earned retirement savings receive advice that is in their best interests,” the Washington Times reports the “industry, Republican lawmakers and conservative analysts say the action will hurt investors of modest means by making financial advice more expensive, due to extra paperwork and other compliance requirements.” Bloomberg News says according to Labor Secretary Perez and National Economic Council chief Jeffrey Zients, the Administration considered “extensive feedback” from the industry, and according to Reuters, the rule is weaker than an initial proposal. The Wall Street Journal also cites concessions to the industry, which it says could make it more acceptable to brokers.
What This Means For Small Businesses
Like workers across America, many small business owners turn to financial advisers to help them plan their future retirement. Financial advice can be costly, and there are plenty of fees on brokerage accounts. However, the Labor Department’s pattern of aggressive regulation is continuing with this proposed fiduciary rule, which a Wall Street Journal editorial warns may be part of a larger plan by the Obama Administration to steer investors out of private investment accounts in favor of government-run plans. American workers should have the freedom to choose retirement solutions that best meet their needs, not have government policy dictating their investment goals.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.