ICYMI: Biden-Harris Administration Announces New Actions to Protect Retirement Security by Cracking Down on Junk Fees in Retirement Investment Advice

Yesterday, President Biden announced new actions to protect retirement security by cracking down on junk fees in retirement investment advice—another key step in the Administration's work to eliminate junk fees and promote competition under Bidenomics. The new proposed rule would close loopholes and require that financial advisers provide retirement advice in the best interest of the saver, rather than chasing the highest payday. This latest action builds on the Biden-Harris Administration's broader efforts to eliminate junk fees, putting cash back in the pockets of Americans.

See coverage below:

Reuters: New Biden target in junk fee crackdown: retirement advisers
[Jarrett Renshaw & Trevor Hunnicutt, 10/31/2023]

The Biden administration on Tuesday sought to impose new rules on retirement plan providers to close loopholes that officials argue allow the industry to sell products that boost their revenue at the expense of customers, the latest effort by the administration to crack down on so-called junk fees. The proposed Labor Department rules require retirement plan providers to only sell commodities and insurance products, such as annuities, to clients when doing so is in the customer's best interest.

They also seek to hold Wall Street to a higher standard for the advice they provide when people roll over assets from an employer plan to another account, such as employee-sponsored 401(k) to an Individual Retirement Account. "Financial advisors should put savers best interest first, and not sell them lower returning products in order to maximize their own fees," Lael Brainard, director of the White House National Economic Council, said.

The Wall Street Journal: Biden's 'Junk Fee' Crackdown Comes for Retirement Advice
[Anne Turgesen, 10/31/2023]

On Tuesday, the Labor Department proposed that financial advisers, brokers and insurance agents should be held to the fiduciary standard on rollover IRAs. The plan is part of a sweeping regulation the agency is proposing that would govern advice affecting trillions of dollars in retirement accounts.

Proponents of the rule change argue it will reduce the odds of savers ending up in expensive investments that will leave them with less money in retirement. According to the White House, it will increase retirement savers' returns by between 0.2% and 1.2% a year, potentially boosting retirement savings by up to 20% over a lifetime.

CNN: Biden administration wants to kill 'junk' fees in retirement investments and advice
[Jeanne Sahadi, 10/31/2023]

As part of its ongoing effort to make it easier for Americans to amass retirement savings and protect consumers from having to pay "junk" fees, the Biden Administration on Tuesday released a proposed rule that would require any financial adviser, broker or insurance agent who sells retirement investments and advice to only do so in the best interest of their clients, not their own. […] The DOL's proposed rule seeks to ensure "all retirement investors receive the same quality of investment advice regardless of product or services," said DOL Acting Secretary Julie Su in a call with reporters.

CNBC: Biden administration to crack down on 'junk fees' in retirement plans
[Greg Iacurci, 10/31/2023]

The U.S. Department of Labor on Tuesday proposed a rule that would raise the bar for financial advisors, brokers and insurance agents who give investment advice to Americans saving in 401(k) plans, individual retirement accounts and other types of savings vehicles. Specifically, the proposal seeks to close "loopholes" in current law that sometimes allow trusted advisors to recommend investments that aren't in a saver's best interest but may pay the advisor a higher commission, administration officials said.

The rule targets financial advice in three areas: rollovers from 401(k) plans to IRAs; "non-securities" products like indexed annuities and commodities like gold, which generally aren't regulated by the Securities and Exchange Commission; and recommendations made to employers on which investment funds to offer in 401(k) plans, according to the White House.

The Hill: Biden administration to propose rule to close retirement advice loopholes
[Brett Samuels, 10/31/2023]

The new Labor Department proposal would require financial advisers to provide retirement advice in the best interest of savers rather than in the interest of a firm pushing a specific investment product, something that the White House said can cost retirees billions of dollars annually.

The White House Council of Economic Advisers (CEA) said in a blog post published Tuesday that financial advisers must hew to a "fiduciary standard" to put their client's interests above their own commissions when recommending investments. But the CEA noted that "blind spots in the current rules can increase costs and fees for consumers, taking a toll on their retirement savings."

The Washington Examiner: Biden proposes rule to cut junk fees for retirement savers
[Naomi Lim, 10/31/2023]

The Biden administration announced Tuesday it would propose a new Department of Labor rule that would expand the existing fiduciary standard that covers advice related to securities, such as mutual funds, to include new types of non-securities, including index annuities, advice to employers and plan fiduciaries, and one-time advice for transactions such as 401(K) rollovers.

"When a retirement saver pays for trusted advice that is actually not in their best interest and comes at a hidden cost to their lifetime savings, that's a junk fee," National Economic Council Director Lael Brainard told reporters Monday. "But retirement advisers shouldn't be paid more for recommending one investment product over another, if it isn't in the client's best interest."

Advisers may earn as much as a 6.5% commission to recommend one retirement product over another," she said. "Over a lifetime, those conflicts of interest can really add up and cost retirement savers up to 20% of their entitlement savings — that's tens or even hundreds of thousands of dollars per middle-class saver."

The Messenger: Biden Proposes New Rule to Crack Down on Retirement Investment Advice Loopholes
[Rebecca Morin, 10/31/23]

President Joe Biden is proposing a new rule intended to close loopholes he says allow financial advisors too much free reign to recommend investments that may not be in their clients' best interests. […] The Biden administration said "blind spots" in the current rules can drive up the fees for retirement investment advice, costing retirees as much as $5 billion a year just in the case of fixed index annuities, a popular insurance-like product that is expensive to buy and hard to understand. Brokers, the main sellers of annuities, pocket heavy commissions on the contracts, so the proposed rule would hit them hard.

Fast Company: Retirement planners might soon need to retire some of the sneaky ways they do business
[Sam Becker, 10/31/23]

A few weeks after the Federal Trade Commission (FTC) announced a new rule targeting junk fees—described as "hidden and bogus fees that can harm consumers and undercut businesses"—the Biden administration is zeroing in on additional extemporaneous charges. This time, the administration is looking to crack down on retirement planners and advisers who may impose their form of "junk fees" on many American families. The proposed rules, which would be enacted through the Labor Department, would look to curtail suspected conflicts of interest that financial advisers may run into when working with clients. […] What is clear is that Biden feels his mission to abolish "junk fees" has momentum, and that the administration feels the rules may stand a chance at succeeding by tying them to that larger campaign.

BenefitsPro: Biden cracks down on 'junk fees' in 401(k) plans with proposed DOL fiduciary rule
[Alan Goforth, 10/31/23]

The Biden administration on Tuesday proposed new rules for retirement plan advisors to crack down on so-called junk fees. The U.S. Labor Department's Retirement Security Rule would require providers to sell commodities and insurance products only when it is in the customer's best interest.

"Financial advisors should put savers' best interests first and not sell them lower- returning products in order to maximize their own fees," said Lael Brainard, director of the White House National Economic Council. "When a retirement saver pays for trusted advice that is actually not in their best interest and comes at a hidden cost to their lifetime savings, that's a junk fee."

MarketWatch: The White House says it wants to help retirement savers avoid billions of dollars in 'junk fees'
[Alessandra Malito, 10/31/23]

President Biden's newest retirement savings proposal announced Tuesday is a nod to the late fiduciary rule, touted as requiring financial advisers to always act in their clients' best interests. The proposal, expected to be officially unveiled Tuesday, will focus on "junk fees," including the payment financial advisers get for recommending one investment product over another, also known as a "conflict of interest." […] "America's families spend a lifetime saving so they can retire with dignity. But junk fees are chipping away at their savings, going to financial advisers with conflicts of interests instead of to American families, and making retirements less secure," the White House announcement said.

Spectrum: White House targets 'junk fees' in retirement financial advising
[David Mendez, 10/31/23]

Financial advisers are intended to be a lifeline to those folks who don't have the time or expertise to research the best way to save for their retirement years.

But junk fees — hidden costs that have become so pervasive that they eat into everything from restaurant receipts to concert tickets purchases to rental fees — have, in their own way, snuck into the investment advice industry.

As part of the Biden administration's war on junk fees, the Department of Labor is proposing a new rule to close cost-increasing loopholes in retirement financial advising, to ensure that financial advisors look out for clients first, maximizing those savings and investments, rather than the advisor's own bottom line. The rule would cover non-securities like fixed indexed annuities, fiduciary advice and one-time transaction advice for things like 401(k) rollovers.

Gray: Biden announces action on retirement investment 'junk fees'
[Staff, 10/31/23]

Biden is calling attention to the practice of financial advisers recommending investments based on their own commissions from firms, rather than the best interest of the client. The White House stated in its fact sheet that, over time, people saving for retirement can earn as much as 20% more when advisers are required to make recommendations in clients' best interests.

Proposed action includes closing a loophole that allows commodities and annuities to be outside the Security and Exchange Commission's best interest regulations.

It would also include changes aiming to protect investors in employer-sponsored 401(k)s and other retirement plans.

Investopedia: Biden Rule Would Make Your Retirement Advisor Work For You—Not For Commission
[Diccon Hyatt, 10/31/23]

The administration of President Joe Biden proposed a set of new rules Tuesday that would require financial advisors to act as fiduciaries, that is, in the best interests of their clients, when advising savers on transferring funds from their employer-sponsored 401k retirement plans to an IRA. That's a change from the current rules, which allow advisors to collect a commission by recommending certain investments during a rollover—an exception from general rules that require advisors to act as fiduciaries in most situations. […]

For retirement savers, the rule means "more money in their retirement savings because it disallows a form of junk fee, that is, padding to the bottom line that doesn't benefit retirement savers, but benefits brokers who are selling them products not in their best interest," said Jared Bernstein, chair of the White House Council of Economic Advisors.