The Obama administration Wednesday rolled out a long-anticipated new rule aimed at transforming the way the financial industry delivers retirement-savings advice—but offered significant concessions to critics that could make it more palatable and less disruptive for brokers.
The fiduciary rule is aimed at curbing billions of dollars in fees paid annually by small savers who transfer money out of 401(k)s, which are required to operate in their best interests—and into individual retirement accounts, which aren’t currently bound by such protections. There, savers may be working with financial-product salespeople who earn more selling certain products and don’t have to put their clients’ interests before their own.
Administration officials intend it as a direct attack on what they consider “a business model [that] rests on bilking hard-working Americans out of their retirement money,” Jeff Zients, director of the White House National Economic Council, told reporters Tuesday.
About $14 trillion in retirement savings could be affected by the rule, which requires stockbrokers providing retirement advice to act as “fiduciaries” who will serve their clients’ “best interest.” That is stricter than the current standard, which only says they need to offer “suitable” recommendations, a standard that critics say has encouraged some advisers to charge excessive fees or favor investments that offer hidden commissions.
Still, reflecting intense lobbying from the financial industry that has fought the regulation since it was first proposed six years ago, the final version includes a number of modifications aimed at softening some of the most contentious provisions.
Among such changes: extending the implementation period of the rule beyond the end of the current administration; giving advisers more flexibility to keep touting their firm’s own mutual funds and other products; and curbing the paperwork and disclosure requirements.
But those fixes, rather than mollifying critics, could also give opposing companies and skeptical lawmakers more time to try to dilute the rule further or even try to kill it altogether under the new administration.
It is unclear yet how opponents will react, because the administration disclosed the new details of the rule to journalists Tuesday but embargoed the release until early Wednesday morning.
[“Source-wsj”]
