During an AARP meeting, President Obama announced Monday that his office is set to create enhanced protections for retirement savings accounts and new transparency rules.
The move is partially the result of a sustained campaign run by the Department of Labor (DOL), progressive groups, and retirement savings advocacy groups such as AARP and AFL-CIO for more transparency requirements for account managers.
Mr. Obama also said that he plans to push for more regulations on financial advisers’ activity when managing retirement savings accounts. Those rules should protect million of Americans from brokers who may be tempted to act for their own profits, according to the President.
He also noted that currently there aren’t any “uniform rules” requesting that financial advisers act in the best interests of the investors. So the current state of affairs is harming millions of middle class and working families, Mr. Obama also said.
“There are a lot of very fine financial advisers out there, but there are also financial advisers who receive backdoor payments or hidden fees for steering people into bad retirement investments that have high fees and low returns,”
the President added.
But Republicans and well-paid industry supporters complain that tighter regulations would boost costs for investors and hurt their businesses. But the President replied that if their business model was based on taking advantage on hard-working Americans and leaving them without their retirement money, then they shouldn’t be in that business.
According to official reports, more than 40 million families invested money in retirement savings accounts which now are worth over $7 trillion. Financial experts estimate that corrupt financial advisors’ actions may deprive the annual returns of one percentage point which accounts for yearly losses of $17 billion.
During the Monday meeting, Mr. Obama also urged nation’s governors to join in his campaign, as well as collaborating on other spiky issues such as education, healthcare, and infrastructure.
President Obama also said that he will not stop until proper financial rules regulate the retirement savings and will not be impressed by the industry’s “doomsday predictions” such as losses of services or a staggering increase in costs.
Under the new rules, which will be proposed by DOL, financial advisers would be compelled to act in the best interests of their clients as a “fiduciary duty.” Additionally, they will have to recommend the most suitable investments according to their clients’ age and willingness to risk.
President Obama had already proposed similar rules in 2010, but faced a fierce industry opposition.
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