Published in Woonsocket Call on June 28, 2015
AARP continues its efforts to push for a proposed U.S. Department of Labor (DOL) Fiduciary Rule that would require financial advisors to put their client’s interests first when giving retirement advice. In advance of last weeks hearing, before the House Education and Workforce Committee, the nation’s largest aging advocacy group delivered nearly 60,000 petitions containing the signatures from every state to support a higher standard in financial advising to prevent conflicts of interest. .
In a June 16 release, the Washington, D.C.-based AARP stated that the June 27th Congressional hearing only showcased financial firms and their concerns, but did not provide much of an opportunity to hear directly from consumers about how the new proposed rule would benefit them. But, AARP’s petitions drive should send a powerful message to Congress, that the nonprofit group, representing 37 million older Americans, and 60,000 voters identified on those petitions want to have their voices heard by Congress on this very pressing retirement issue.
When Advising, Do No Harm
“While a number of investment advisers also support a rule requiring advice to be in the best interest of clients, some opponents have recently weighed in with comments that offer time worn code words for harming consumers,” said Nancy LeaMond, Chief Advocacy and Engagement Officer, AARP. She says that the delivered petitions would ensure “that all, not just some, financial advisers put their clients’ interests first.”
“Many opponents of the proposed new rule, who are asking for delays or say the regulatory costs are too high, are simply looking to protect high fees at the expense of consumers. But consumers deserve advice in their best interest, not advice that benefits the adviser,” says LeaMond.
In addition to forwarding petitions to the Department of Labor, AARP volunteers continue their efforts to call on Congress to prevent legislation that seeks to stop or slow an updated “best interest” standard. According to the AARP, “each year hidden fees, unfair risk and bad investment advice rob Americans of $17 billion of retirement income.”
LeaMond says that AARP plans to submit comments to the DOL on the proposed rule in the weeks ahead. The nonprofit group’s petition delivery included over 33,000 signatures and follows an initial petition delivery last month that included over 26,000 signatures that support eliminating conflicts of interest in retirement advice. “It is important that the Department hear from individuals who are negatively impacted by the current standard, not just financial firms who benefit from it,” she said.
AARP’s petition drive efforts followed President Obama’s February visit to AARP Headquarters where he used the opportunity to publicly support the proposed DOL rule, endorsed by a coalition of aging, labor and consumer groups that limits conflicts of interest, increases accountability, and strengthens protection for Americans receiving retirement investment advice.
At the AARP press event, Obama called for the updating of DOL rules and requirements that would mandate higher standards for financial advisors, requiring them to act solely in their client’s best interest when giving financial advice.
Obama noted that the existing rules governing retirement investments written over 40 years ago “outdated,” filled with “legal loopholes,” and just “fine print,” to be in need of an overhaul. The existing rules governing retirement investments were written “at a time when most workers with a retirement plan had traditional pensions, and IRAs were brand new, and 401ks didn’t even exist,” said the President.
According to Megan Leonhardt, senior editor for WealthManagement.com, in a June 15th article, “New Coalition Pushes for DOL Fiduciary Rule,” DOL’s proposed rule has “been delayed multiple times since the agency first rolled it out in 2010. It was expected to be released in August according to the agency’s regulatory agenda, but an update in May pushed back the date to January.”
“Industry lobbyists have mounted significant pushback. The Securities Industry and Financial Markets Association and the Financial Services Institute have argued a rule similar to the DOL’s initial proposal could limit the public’s access to quality financial advice,” says Leonhardt.
Acting in the Client’s Best Interest
“Rhode Island has been part of the national effort to move the Labor Department rule forward,” said AARP Rhode Island State Director Kathleen Connell. “We’ve talked to people who have been quite surprised to know that their savings could be at risk by having an adviser fail to act in their client’s best interest. The response to the petition campaign is a measure of the concern. Retirement planning is daunting for the vast majority of Rhode Islanders. There’s plenty to worry about. Having confidence that your financial adviser is working in your best interest would relieve some of the anxiety. That’s why there seems to be overwhelming support for the rule change.”
Along with AARP, Rhode Island federal lawmakers are weighing in on this key retirement issue, seeing its importance to older Rhode Islanders.
Rep. David N. Cicilline (D-RI) says, “Protecting the financial well-being of our seniors is a top priority for me, and ensuring that they have access to complete and accurate information before making investment decisions is an essential component of that effort. President Obama and Labor Secretary Perez are leading a good faith effort to protect consumers, including seniors and I look forward to evaluating the final rule after the public comment period ends and I have had the benefit of considering these comments.”
Adds, U.S. Senator Sheldon Whitehouse (D) “Investors should have the security of knowing that the advice they receive is in their best interest. I applaud the Obama Administration for updating regulations on retirement investments and for working with a wide range of stakeholders to ensure the new rules help Americans save more for retirement.”
For this writer, hiring a financial advisor is like purchasing a used care, that is you always feel that you might have made the wrong decision. New DOL requires that call for higher standards for financial advisors, who would be required to act solely in their client’s best interest when giving advice, just might give me peace of mind, when planning my retirement…and probably to millions of older Americans, too.
Herb Weiss, LRI ’12, is a Pawtucket-based writer covering aging, health care and medical issues. He can be reached at email@example.com.