Obama Administration Proposes Rules to Tighten Broker Standards for Retirement

Friday, May 15, 2015

One source notes that the Department of Labor is moving full steam ahead with a proposed fiduciary standard for anyone giving retirement investment advice. As the Wall Street Journal notes, at present, brokers’ recommendations only have to be “suitable.”

The proposed rule would require financial advisers dealing with retirement savings to do so in their clients' best interests and disclose any potential conflicts of interest. It also calls for several prohibited transaction exemptions that would allow retirement advisers and service providers to continue arrangements like revenue sharing and fees.

The rules come as individuals have become increasingly responsible for their own retirement security as traditional pensions have mostly disappeared in favor of IRAs and 401(k)s. Such products either didn’t exist or were brand new when the department wrote its rules for retirement advice 40 years ago but now contain about $11 trillion in assets.

Labor Secretary Tom Perez notes that the rule is “intended to provide guardrails but not straitjackets, so we know consumers are getting advice that is in their best interest.

The DOL sent its proposed rule to the Office of Management and Budget for regulatory review on Feb. 23, which typically can take up to 90 days. The proposed rule is now being released for a 75-day public comment period, followed by a public hearing and further public commentary.