DOL takes aim at ‘junk fees’
The Biden administration is targeting what it calls “junk fees” as it attempts to strengthen investment advice rules for retirement accounts.
The Department of Labor will release a proposal Tuesday designed to curb conflicts of interest around retirement savings recommendations. Called the retirement security rule, it would “close loopholes” and rework the definition of a fiduciary under federal retirement law for advisors who provide advice for a fee to employee benefit plans and individual retirement accounts, according to a White House fact sheet.
The proposal would amend the current five-part test that determines fiduciary status for retirement accounts by making it harder for advisors to avoid fiduciary obligations. It would define as a fiduciary act a one-time recommendation to roll funds from a company retirement plan to an individual retirement account; strengthen advice standards for independent insurance professionals; and apply to insurance products that are not securities. It also would cover advice to plan sponsors about which investments to make available on the menu of company retirement plans.
The proposal seeks to curb conflicts that occur when a financial advisor is paid more to recommend a certain investment product, even though the product could diminish a nest egg because of high fees, said Lael Brainard, director of the National Economic Council.
“President Biden believes that when Americans save their hard-earned money so they can retire with dignity, financial advisors should put savers’ best interests first and not sell them lower-returning products in order to maximize their own fees,” Brainard told reporters Monday evening. “When a retirement saver pays for trusted advice that is actually not
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