Financial Planning (October 31, 2023) By Tobias Salinger
A new version of the Department of Labor fiduciary rule that the agency is calling the "retirement security rule" is setting up the industry's next big regulatory debate.
President Joe Biden's administration proposed the new rule from the Department of Labor's Employee Benefits Security Administration on Oct. 31. The rule aims to protect consumers from "junk fees" that, the administration said, amount to conflicts of interest around investment advice given to retirement plan participants and savers that reduce yields, impose high costs and rack up commissions. Fact sheets and calculations released by the administration indicate that Americans lose as much as $5 billion per year to conflicted advice about fixed index annuities alone. The potential rule change, and that estimate, are likely to draw massive pushback.
The proposal came more than five years after an appeals court decision invalidated an Obama administration rule that the Labor Department says applied to nearly all recommendations to retirement investors. The agency said the new version is much narrower. In 2019, the Securities and Exchange Commission issued Regulation Best Interest during President Donald Trump's administration. The industry has largely praised that rule, while consumer advocates decried it as a watered-down version of the Obama regulation.
Scroll down the slideshow below to see the first reactions across the industry to the Labor Department's rule proposal. For a look at 24 other new rules and proposals to watch, click here. And, to view one trade group's criticism of the SEC's approach to rulemaking under Chair Gary Gensler, follow this link.