WASHINGTON — The White House on Tuesday announced that the Department of Labor will propose a new rule that aims to protect retirement security and combat junk fees.
If finalized, the rule would “require that financial advisers provide retirement advice in the best interest of the saver, rather than chasing the highest payday,” according to a White House fact sheet.
Because of a “loophole” in Securities and Exchange Commission regulations, some financial advisers are paid to recommend specific investment products, leading to a conflict of interest with the saver they are advising, the White House said. The rule is designed to close that loophole and help standardize rules across states that govern advice on buying insurance products.
The rule would “require trusted investment advisers to adhere to high standards of care and loyalty when they make investment recommendations and avoid recommendations that favor their financial and other interests at the expense of retirement savers,” according to a Labor Department press release.
“America’s families spend a lifetime saving so they can retire with dignity,” the White House fact sheet said. “But junk fees are chipping away at their savings, going to financial advisers with conflicts of interests instead of to American families, and making retirements less secure.”
The Federal Trade Commission said that junk fees are “hidden and bogus fees that can harm consumers and undercut honest businesses.”
Tuesday’s proposed rule is the latest in a series of moves by the Biden administration to eliminate junk fees. Earlier this month, the administration proposed a rule that would “ban businesses from charging hidden and misleading fees and require them to show the full price up front,” according to a fact sheet.
Earlier this month, President Joe Biden called junk fees “wrong.”
“It’s just taking advantage of people,” he said. “And it makes it harder for honest businesses who are trying to do the right thing to compete with dishonest companies who trick customers into thinking their prices are lower when they, in fact, are not.”
Biden is expected to address the new proposed rule Wednesday afternoon from the White House.
“For too many workers, the road to lifelong financial security is unnecessarily paved with uncertainty. This rule ensures that savers of all income levels can work confidently with investment professionals to grow their nest egg and prepare for the joyful retirement they deserve,” said acting Labor Secretary Julie Su in a press release. “America’s workers and their families should not have excess fees and lost investment returns chipping away at their retirement savings due to the cost of conflicted investment advice.”
The proposed rule will be posted to the Labor Department’s website Tuesday and include 60 days for public comments, according to the press release.
