WASHINGTON — The White House announced Tuesday that the Labor Department will propose a rule to protect retirement security and combat junk fees.
If it is finalized, the rule would "require that financial advisers provide retirement advice in the best interest of the saver, rather than chasing the highest payday," according to a White House fact sheet.
Because of a "loophole" in Securities and Exchange Commission regulations, some financial advisers are paid to recommend specific investment products, leading to conflicts of interest with the savers they are advising, the White House said. The rule is designed to close that loophole and help standardize rules across states that govern advice about buying insurance products.
The rule would “require trusted investment advisers to adhere to high standards of care and loyalty when they make investment recommendations and avoid recommendations that favor their financial and other interests at the expense of retirement savers,” the Labor Department said in a news release.
The White House fact sheet said: “America’s families spend a lifetime saving so they can retire with dignity. But junk fees are chipping away at their savings, going to financial advisers with conflicts of interests instead of to American families, and making retirements less secure.”
The Federal Trade Commission said junk fees are "hidden and bogus fees that can harm consumers and undercut honest businesses."
Tuesday's proposed rule is the latest in a series of moves by the Biden administration to eliminate junk fees. The administration this month proposed a rule that would "ban businesses from charging hidden and misleading fees and require them to show the full price up front," according to a fact sheet.
Biden addressed the proposed rule Tuesday afternoon from the White House.
"When a person pays for trusted advice and it comes with a hidden cost, that's what I call a junk fee," Biden said. "And I think it's wrong."
Biden warned financial advisers who steer clients toward investments that are in the advisers' best interest, rather than the clients': "I just want you to know, we're watching."
"They're putting their self-interest ahead of their clients' best interest, and they're scamming Americans out of hard-earned money," he added. "People should be able to trust that when they get advice from a so-called expert, they're getting real help, not getting ripped off."
Acting Labor Secretary Julie Su said in a news release: “For too many workers, the road to lifelong financial security is unnecessarily paved with uncertainty. This rule ensures that savers of all income levels can work confidently with investment professionals to grow their nest egg and prepare for the joyful retirement they deserve. America’s workers and their families should not have excess fees and lost investment returns chipping away at their retirement savings due to the cost of conflicted investment advice.”
The proposed rule will be posted to the Labor Department's website Tuesday and include 60 days for public comments, according to the news release.
