The U.S. Department of Labor is apparently near the end of its work on establishing a fiduciary standard for those who give retirement planning advice, Employee Benefit News reports.
The Labor Department has proposed a change to the definition of fiduciary under the Employee Retirement Income Security Act that that would expand the scope of those who become fiduciaries. Only financial advisers are currently bound by the fiduciary rule, which requires them to keep their clients best interest first. Brokers are now bound only by the suitability rule, which requires them to make recommendations that are suitable, but the new regulations would expand the fiduciary standard to encompass them.
Phyllis Borzi, Assistant Secretary of Labor with the Employee Benefits Security Administration division, told attendees at the recent American Society of Pension Professionals & Actuaries conference, that the conflict of interest regulations could be ready by year end, EBN’s Andy Stonehouse writes.
“It’s entirely possible, though I’m a poor prognosticator on dates,” Borzi said during a question-and-answer session in Washington, D.C.
She said the regulations have been through a complex and uniquely public set of comments and re-examinations. The proposal has been very controversial in the retirement planning and benefits administration field, EBN reports.
Borzi said that clearer fiduciary guidelines would create a more even playing field for employees and consumers hoping to make important financial decisions or make better use of their existing 401(k) benefits, Stonehouse writes.
“There’s some sort of implicit assumption that consumers don’t want to pay for unbiased advice and I think there’s also a completely false assumption that advice that comes as part of a sales and marketing approach is free,” she said. “The people who give financial advice are not providing that advice for free they have higher-fee products with lower returns. It’s false to think that they’re not getting compensated, even if they do give advice that’s in the best interest of their clients,” EBN quoted Borzi as saying.
