Class Action

Ponzi Schemes

Latest News

8:00am - 5:00pm EST

Office Hours Monday - Friday

(574) 722-6676

Call Us For Free Consultation

Facebook

Twitter

News
 

Obama Calls For New Rules to Save Investors Billions

Obama Calls For New Rules to Save Investors Billions

If President Obama gets his way, your retirement savings could grow even more each year.

In a recent speech to AARP supporters in Washington, Obama said he is asking the Labor Department to write new rules that could save investors as much as $17 billion dollars a year by requiring financial advisers to put their client’s interests above their own with regard to investors’ retirement plans.

Fiduciary duty of brokers

Why the rule change? Currently, brokers are held to a ‘suitability’ standard which means they must reasonably believe their recommendation for a customer. Obama is calling for regulations that would make it the fiduciary duty of brokers to act in their clients’ best interest, thereby providing ‘meaningful protections’ to investors.

Broker misconduct?

There are many ways in which brokers give bad advice resulting from conflicts of interest. For example, according to Obama, some investors receive backdoor payments or hidden fees for steering people into bad retirement investments that have high fees and low returns.

Some brokers also boost their commissions by engaging in excessive trading, since they make a commission with each trade.

Obama cited a study by Harvard and MIT in which volunteers posed as investors. He said that out of 284 client visits, advisers recommended funds with higher fees about half the time. The President also gave the example of an Illinois couple whose financial adviser put their money in an expensive annuity that made it hard to access cash when they needed it.

Big losses on retirement savings

According to Obama, the absence of “uniform rules of the road” requiring retirement advisers to act in the best interests of their clients results in Americans losing as much as $17 billion a year in savings.

Retirement advice protections long overdue

Groups speaking in favor of the new rules include AARP, a group called the Save Our Retirement coalition, and the AFL-CIO. Richard Trumka, president of the AFL-CIO, claims that retirement investment advice protections are long overdue. He pledged that his organization will fight hard to make the proposed rule changes a reality.

Wall Street against new Labor rule

Many Wall Street leaders are against the new Labor rule. In fact, Wall Street has spent more than four years lobbying against the new code of conduct, and some have argued that costlier regulations would take away options for smaller investors, who would lose access to affordable advice as well as investment choices.

The executive director of the National Association of Plan Advisors, Brian Graff, said investors could lose money and assistance under the rules. Graff said people could be prevented from working with advisers of their choice due to investors offering financial products like annuities and mutual funds with different fees.

The proposed rule changes are now in the hands of Congress, and action could take months.

The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.

Sources: USA Today and Investment News