The White House announced on Tuesday that the Department of Labor will propose a new rule to protect retirement security and combat junk fees. This rule, if finalized, will require financial advisers to provide retirement advice in the best interest of the saver instead of prioritizing their own financial gain, as stated in a White House fact sheet.
The White House explains that due to a “loophole” in Securities and Exchange Commission regulations, some financial advisers receive payment for recommending specific investment products, creating a conflict of interest with the savers they are advising. This rule aims to close that loophole and establish consistent rules across states regarding advice on purchasing insurance products.
According to a Labor Department press release, the rule will require trusted investment advisers to adhere to high standards of care and loyalty when making investment recommendations. They will be discouraged from making recommendations that prioritize their own interests over the retirement savers’ interests.
The White House fact sheet emphasizes that “America’s families spend a lifetime saving so they can retire with dignity.” However, junk fees deplete these savings, benefiting financial advisers with conflicts of interest instead of supporting American families and undermining retirement security.
The Federal Trade Commission states that junk fees are hidden and bogus fees that harm consumers and harm honest businesses.
This proposed rule by the Biden administration is part of a broader effort to eliminate junk fees. The administration recently proposed a rule that would ban businesses from charging hidden and misleading fees, requiring them to disclose the full price upfront, as stated in a fact sheet.
President Joe Biden has criticized junk fees, stating that they are “wrong” and take advantage of people. He points out that these fees make it difficult for honest businesses to compete with dishonest ones that deceive customers with lower prices that aren’t actually lower.
Biden is expected to address the proposed rule from the White House on Wednesday afternoon.
Acting Labor Secretary Julie Su expressed that this rule ensures savers of all income levels can work confidently with investment professionals to secure a joyful retirement. She states in a press release that excess fees and lost investment returns should not diminish workers’ retirement savings due to the cost of conflicted investment advice.
According to the press release, the proposed rule will be available for public comments on the Labor Department’s website for the next 60 days.
This article was originally published on NBCNews.com.
