In April, the Department of Labor — after years of deliberation and public comment — issued regulations requiring that financial advisers act in the best interests of their clients in giving retirement investment advice. Once the regulations take effect, advisers will no longer be able to steer clients to investments that generate high fees for the advisors and lower returns than investors might get with other investments.
Under the regs, advisers will have a much harder time selling their variable, fixed, and equity annuities — and all the complicated combinations thereof — and will have to focus on lower-cost investments such as stock index funds. These are investments that buyers can actually understand.
The regulations are just common sense, but the Republican-controlled Congress, under pressure from the financial industry, sought to thwart them. On April 28, the House passed a resolution of disapproval, and the Senate passed the same resolution, H.J. Res. 88, on May 24.
Thankfully, on June 8, President Obama vetoed the resolution, and now, the regulations can come into force. In his veto message, the President said,
“The outdated regulations in place before this rulemaking did not ensure that financial advisers act in their clients’ best interests when giving retirement investment advice. Instead, some firms have incentivized advisers to steer clients into products that have higher fees and lower returns — costing America’s families an estimated $17 billion a year.”
If you want to see how your House member or Senator voted on H.J. Res. 88, click here and here. A vote in favor of H.J. Res. 88 is a vote for the industry; a vote against is a vote for seniors. Take note, and remember in November.