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Release date 04/06/2016
WASHINGTON, D.C. – The U.S. Department of Labor today is releasing new rules to update and strengthen the safeguards for consumers who are saving for retirement.
Consumers Union, the advocacy arm of Consumer Reports, said the new rules aim to put more rigorous standards in place for brokers and other financial professionals who provide retirement investment advice. Under the new rules, these advisers will be held to higher standards that require them to put their clients’ best interest ahead of their own financial gains.
Pamela Banks, senior policy counsel of Consumers Union, said, “This is an important step that could help protect the retirement security of millions of Americans. The old rules were outdated, and these changes are long overdue. When you’re planning for your retirement, your adviser should be focused first on what makes sense for your finances, not theirs. Too often, some financial advisers may steer you towards investments with high fees and lower returns that benefit their bottom line, while leaving you paying a heavy price."
Banks added, "As we review the details of these final rules, we are optimistic that they will help remove conflicts of interest that can jeopardize a happy, financially-healthy retirement.”
Consumers Union has long advocated for reforms to modernize the rules for retirement advisers. The Labor Department first proposed a change to the rules in 2010 and formally proposed new rules for consideration in 2015. Consumers Union filed comments in support of the changes and met with officials at the Department, the White House and Congress to push for the strongest possible standards and urge them to resist industry pressure to weaken the rules.
Retirement savers could hold on to tens of thousands of dollars more over their lifetimes thanks to this new "fiduciary rule.” Some may assume all financial advisers act in their clients' best interests, but that hasn't necessarily always been the case. While consumers have long been able to turn to fee-only advisers (also known as fiduciaries) who acted in their best interest, they also had the option of using commission-based advisers, such as stock brokers, who were only required to adhere to what is known as a "suitablity standard." That meant they could provide their clients with investment options that were considered suitable for their needs, but might come with high fees that benefited the advisers.
Under the new rules, which fully go into effect by January 2018, all financial advisers, whether fee-only or commission-based, will have to adhere to the same standards. They are required to make customers aware of their right to complete information on the fees charged and direct them to a web page or written material disclosing compensation arrangements. Advisers will be required to charge only a "reasonable" compensation, and they must avoid misleading statements about fees and disclose any conflicts of interest.
Media Contacts:
David Butler, Consumers Union, 202.462.6262 or dbutler@consumer.org
Kara Kelber, Consumers Union, 202.462.6262 or kkelber@consumer.org
Consumer Reports is a nonprofit membership organization that works side by side with consumers to create a fairer, safer, and healthier world. For 80 years, CR has provided evidence-based product testing and ratings, rigorous research, hard-hitting investigative journalism, public education, and steadfast policy action on behalf of consumers’ interests. Unconstrained by advertising or other commercial influences, CR has exposed landmark public health and safety issues and strives to be a catalyst for pro-consumer changes in the marketplace. From championing responsible auto safety standards, to winning food and water protections, to enhancing healthcare quality, to fighting back against predatory lenders in the financial markets, Consumer Reports has always been on the front lines, raising the voices of consumers.
© 2016 Consumer Reports. The material above is intended for legitimate news entities only; it may not be used for advertising or promotional purposes. Consumer Reports® is an expert, independent, nonprofit organization whose mission is to work side by side with consumers to create a fairer, safer, and healthier world. We accept no advertising and pay for all the products we test. We are not beholden to any commercial interest. Our income is derived from the sale of Consumer Reports® magazine, ConsumerReports.org® and our other publications and information products, services, fees, and noncommercial contributions and grants. Our Ratings and reports are intended solely for the use of our readers. Neither the Ratings nor the reports may be used in advertising or for any other commercial purpose without our prior written permission. Consumer Reports will take all steps open to it to prevent unauthorized commercial use of its content and trademarks.
Consumer Reports is a nonprofit membership organization that works side by side with consumers to create a fairer, safer, and healthier world. For 80 years, CR has provided evidence-based product testing and ratings, rigorous research, hard-hitting investigative journalism, public education, and steadfast policy action on behalf of consumers’ interests. Unconstrained by advertising or other commercial influences, CR has exposed landmark public health and safety issues and strives to be a catalyst for pro-consumer changes in the marketplace. From championing responsible auto safety standards, to winning food and water protections, to enhancing healthcare quality, to fighting back against predatory lenders in the financial markets, Consumer Reports has always been on the front lines, raising the voices of consumers.
© 2016 Consumer Reports. The material above is intended for legitimate news entities only; it may not be used for advertising or promotional purposes. Consumer Reports® is an expert, independent, nonprofit organization whose mission is to work side by side with consumers to create a fairer, safer, and healthier world. We accept no advertising and pay for all the products we test. We are not beholden to any commercial interest. Our income is derived from the sale of Consumer Reports® magazine, ConsumerReports.org® and our other publications and information products, services, fees, and noncommercial contributions and grants. Our Ratings and reports are intended solely for the use of our readers. Neither the Ratings nor the reports may be used in advertising or for any other commercial purpose without our prior written permission. Consumer Reports will take all steps open to it to prevent unauthorized commercial use of its content and trademarks.