In an effort to ensure investors are getting truly objective advice, the Labor Department on Tuesday issued a proposed rule that would require all advisors who offer retirement advice to put their clients' interests first.
"Conflicts of interest can lead to bad advice and hidden fees," said Labor Secretary Thomas Perez, announcing the proposal in a press conference. "We shouldn't have to question whether the person giving us advice has our best interests at heart."
The proposed rule would extend the so-called fiduciary standard to any advisor or broker offering investment advice to employers offering retirement plans, participants in those plans, and IRA account holders. Many investment advisors are currently required to follow that standard, which means they must always put investors' financial interests ahead of their own.
But brokers are only required to recommend suitable investments, which critics say means they can advise a client to invest in a fund or other asset with higher fees, lower performance, or both, provided it seems appropriate.
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"We clearly need to fix the rules of the road so people who are working hard and saving for their retirement can have peace of mind that the advice they are getting is always, always in their best interest," said Jeff Zients, director of the National Economic Council and assistant to the President for economic policy, who announced the proposal with Secretary Perez.