Making financial advisors more accountable

Monday, March 02, 2015

Thousands of dollars in retirement savings can quietly, legally disappear from consumers’ retirement accounts over time because of conflicts of interest. Conflicts can arise when a broker focuses more on the commission he earns rather than the financial advice he recommends. 

A simple rule to require that financial advisors must put their clients’ interests first has been proposed by the U.S. Department of Labor (DOL) and endorsed by President Obama. 

Consumer Action has joined a broad coalition in supporting an update to financial rules—called a fiduciary duty—that would require Wall Street brokers, bankers, and insurance agents to put their clients’ best interests ahead of their own. Some financial advisors already voluntarily operate this way. Others recommend investments with higher fees or riskier features that may benefit the advisor’s bottom line and can cost consumers thousands of dollars in retirement savings. The White House estimates that lopsided advice and fees cost consumers $17 billion a year in retirement savings.

New rules would help stop financial professionals from steering investors into unnecessarily expensive retirement funds and other investment products. Meanwhile, financial industry groups argue that strict rules could lead to fewer retirement investment options for consumers but Consumer Action believes that basic financial products, such as low-cost, diversified funds that track indexes are the best approach for most of Americans. 

For more information on the campaign to update fiduciary duty rules, visit the Save Our Retirement website.

For more about investment advisors, see: Learn About Different Types of Investment Professionals.