White House: "conflicted advice leads to large and economically meaningful costs for Americans’ retirement savings."

Monday, March 2, 2015

In a report issued in February 2015 the White House concluded that conflicted investment advice harms investors to the tune of billions of dollars.  The White House estimates losses at between $8 billion and $17 billion or between 1 percent and 0.5 percent of the $1.7 trillion dollars of IRA assets under management.

The report suggests that mandated disclosures are not a solution. They may actually backfire by providing a false sense that advice is unbiased.  Disclosures are not read by investors.  They are often are not understood.  They are in fine print or in legalese and may not be understood.   

The report also suggests that the American public receives much less protection against conflicts of interest than our neighbors in Canada, Europe, and India.

This report supports a push by the White House, as widely reported, to have the Department of Labor move forward with rules that will impose a fiduciary standard on all stock brokers handling retirement accounts.