Tell the Department of Labor to Stop Wall Street from Draining Your Retirement Account
By Mike Hall & Kenneth Quinnell, AFL-CIO
When you pay a financial adviser to help you invest your hard-earned retirement savings, you would assume that they would be required, by law, to have your best interests at heart. But because of loopholes in the rules, advisers can get away with not only putting their own financial interests above that of their clients, but also allows them to take incentives from Wall Street firms to recommend investments that drain funds from ordinary Americans’ retirement accounts through hidden fees and lower returns. The White House Council of Economic Advisers says this costs us $17 billion a year.
The Labor Department is currently considering revising the rules for financial advisers and is taking comments from the public. Tell them now to fix these loopholes and make sure that financial advisers put the needs of their clients ahead of those of Wall Street and themselves.
Here’s what we previously wrote about the rules and the proposed changes:
The Obama administration today took the first step to close a loophole in the rules that govern Wall Street brokers and financial firms that provide retirement investment advice. That loophole can drain away thousands, or even tens of thousands, of dollars of hard-earned savings from a single retirement account.
The “Retirement Advice Loophole“ allows Wall Street brokers and financial firms with major conflicts of interest to provide investment advice that serves their own interests instead of what’s best for their clients. Obama ordered the U.S. Department of Labor to submit a proposed rule to strengthen financial advisers’ fiduciary responsibilities and crack down on these practices.
AFL-CIO President Richard Trumka said the new rules are “long overdue” and a “good first step.” Under current rules, he said, Wall Street firms can “create and distribute investment products to elevate a financial adviser’s paycheck over the best interests of workers and retirees.”
For example, they can sell financial products that pay large commissions but hurt their clients with unnecessary fees, poor returns or excessive risks. Millions of Americans are affected by this loophole every year without even knowing it, and it is draining away their retirement savings.
Right now, some advisers are required to put their customers’ interests first while others are not—and it is often extremely difficult for workers and retirees to know which type of adviser they are dealing with.
“Americans are worried about having a secure retirement, especially as they face increasingly complicated choices about how to save and invest their hard-earned dollars,” said Trumka.
When they turn to professional financial advisers to help navigate their complex choices, they should be able to have confidence that the advice they get is in their best interest—and not driven by sales commissions and high fees that can deplete their retirement accounts like a slow leak in a tire.
Of course, Wall Street and the financial industry are adamantly opposed to reforming the rules. Two years ago, they lobbied hard for a House bill aimed at derailing any new Labor Department investment advice rule, and surely they will be spending big money to do the same thing in 2015.
Read Trumka’s full statement here and be sure to visit SaveOurRetirement.com to learn more and find out how you can help close the “Retirement Advice Loophole.”