Published: September 2014

The Dept. of Labor has the chance to protect Americans hoping to retire one day

Coalition: Americans for Financail Reform (AFR)

Millions of hardworking Americans who have spent years saving for retirement are receiving financial guidance from professional advisers who are not obligated to act in the best interest of their clients, (called a fiduciary duty), resulting in a huge drain on retirement savings for many workers and retirees. Those advisers are often permitted to recommend investments that come with high fees, poor returns, and even substantial risks because they have no fiduciary duty to their clients. This behavior will continue unless the U.S. Department of Labor completes its work updating the 40-year old fiduciary duty rule that regulates those who advise retirement plans and plan participants.

In a letter to Congress and the Obama Administration, Consumer Action joined coaltion advocates in urging The Department of Labor (DOL) and Labor Secretary Thomas Perez to continue their efforts to update and strengthen the outdated protections that apply to those who seek provessional advice about their retirement investments and savings. The DOL’s fiduciary duty rule was adopted in 1975 and has not been updated for almost 40 years, notwithstanding enormous changes in the way Americans save and invest for retirement. Traditional defined benefit plans offered by employers have been largely replaced by IRAs and 401(k)’s (which did not exist 40 years ago),” wrote the group. “As a result, most workers can no longer rely on professionally managed pensions to guarantee a secure retirement. In addition, workers and retirees must choose from a large variety of investment options, many of which are difficult to understand.”

Under the outdated rule, which was adopted during the Ford administration, Americans have paid a heavy price, amounting to tens or even hundreds of thousands of dollars in lost retirement income – as a consequence of the status quo which permits trusted financial advisers to profit at their clients’ expense.

If the DOL completes its updated fiduciary rule, it will finally ensure that all those who provide investment advice to retirement accounts are required by law to act in the best interest of their clients. There is a substantial public interest in ensuring the largest possible share of retirement savings goes to the saver, without unnecessarily high sums being siphoned off or redirected to advisers with conflicts of interest.

Action by the DOL to update and strengthen the protections that apply when individuals receive advice about their retirement investments has the potential to deliver concrete benefits to millions of workers, investors, and retirees – all at no cost to the US treasury or taxpayers. At the very least, the DOL should proceed with its rulemaking, allowing stakeholders to evaluate the rules on their merit when the regulations are reproposed.

Other Organizations

AARP | AFL-CIO | AFSCME | Alliance for Retired Americans | American Federation of Government Employees | American Federation of School Administrators | American Federation of Teachers | Americans for Financial Reform | Better Markets | Consumer Action | Consumers for Auto Reliability and Safety | Consumer Federation of America | Consumers Union | Demos | The Economic Policy Institute | Fund Democracy Inc. International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists and Allied Crafts | International Association of Machinists and Aerospace Workers | International Brotherhood of Electrical Workers Union | International Brotherhood of Teamsters | International Federation of Professional and Technical Engineers | International | Longshoremen’s Association | International Union of Bricklayers & Allied Craftworkers | The Leadership Conference on Civil & Human Rights | Metal Trades Department, AFL-CIO | NAACP | National Association of Letter Carriers | The National Coalition for Asian Pacific American Community Development | National Committee to Preserve Social Security and Medicare | National Senior Citizens Law Center | National Women’s Law Center Pension Rights Center | Public Citizen | SEIU | United Auto Workers | United Food and Commercial Workers Union | U.S. PIRG | United Steel Workers | Wider Opportunities for Women

More Information

For more information, please read the coaltion's letter here.

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