President Barack Obama is scheduled to speak to the AARP on Monday afternoon, where he is expected to propose tougher regulations on financial brokers who supposedly are more concerned with maximizing their own profits than properly managing retirement accounts.
The "crackdown on Wall Street," as the administration is portraying it, would direct the Labor Department to draft regulations aimed at limiting conflicts of interests among retirement brokers, reported The Washington Times.
The White House is concerned about brokers steering investments to funds that pay them higher fees, but only pay the investors mediocre returns.
Under the new proposal, brokers selling stocks, bonds, annuities and other investments would be held to same strict requirements as registered financial advisers, when they handle clients' retirement accounts, Fox News reported.
Brokers would be held to the fiduciary duty standard, which requires them to work in the best interest of their clients. Current rules only stipulate that brokers must believe their advice is "suitable" for an investor.
The administration proposed similar regulations back in 2010, but withdrew the plan after it was met with an outcry from the financial service industry who said the proposal limited investor choice and would hurt more than help.
According to a report released by the White House Council of Economic Advisers, broker mismanagement cost middle-class families 1 percent per year in lower returns on retirement savings, or about $17 billion nationwide per year, The Washington Times noted.
"When you go to a doctor or a lawyer, you expect the advice you get to be in your best interests. But the same doesn't always hold true in the world of retirement savings," Labor Secretary Tom Perez told reporters, according to Fox News. "Many financial advisers have taken an oath to serve your best interests, but there are other financial advisers and brokers who provide critical financial advice every day and are not obligated to look out for your best interests."
But critics say that the proposal would risk significantly limiting the advice available to investors who have smaller retirement savings, and argue that the regulations should be left to the Securities and Exchange Commission.
Last week, SEC Commissioner Daniel Gallagher called the proposals "thinly-veiled propaganda designed to generate support for a widely unpopular rulemaking," reported the Times.
"Investors benefit from choice; choice of products, and choice in advice providers," Gallagher said in a speech Friday. "This is something the nanny state has a hard time comprehending."
