April 6 was an historic day for consumers. On that day, the Department of Labor (DOL) issued the so-called Fiduciary Rule. The Fiduciary Rule, which has been years in the making and has been vigorously opposed by industry, will require retirement investment advisors to act in the best interests of the consumers they are advising.
Woodstock, along with 3,000 others, provided the DOL with comments when the DOL proposed the rule in April of last year. The bulk of the Fiduciary Rule takes effect on April 10, 2017. Today, without the rule, financial professionals are able to put their own interests ahead of their customers’ interests when providing advice that customers need to make critical retirement investment decisions. The ability of advisors to avoid fiduciary responsibility has been shown to harm consumers.
Over the past few decades, there has been a significant shift from defined benefit to defined contribution plans, making more consumers responsible for their own retirement investments. Consumers are faced with complex and confusing systems and a multitude of decisions that can become easily overwhelming. A 2012 study by the Securities and Exchange Commission (http://www.sec.gov/news/studies/2012/917-financial-literacy-study-part1.pdf) shows that many Americans lack the level of financial literacy to understand important concepts necessary for investing and managing retirement accounts. The study noted that this lack of financial literacy has serious negative implications for people’s ability to adequately save for retirement, especially given the increased use of defined contribution plans. Consumers quite naturally seek out expert advice when trying to plan for retirement. But relying on advice from financial advisers who do not act as a fiduciary can be extremely costly. According to the White House, advice by advisors who have conflicts of interest costs working and middle class families $17 billion per year. This kind of money can mean the difference between having a comfortable retirement or outliving your savings.
The industry has fought hard against the Fiduciary Rule. Litigation is expected, and there is legislation pending to block it from taking effect. Illinois U.S. Senator Mark Kirk is the lead sponsor of S. 2505, a bill inappropriately named “the SAVERS Act.” That bill would preserve the ability of financial advisors to put their interests ahead of the interests of the consumers they are meant to serve. Please contact Senator Kirk’s office to express your opposition to S. 2505 by visiting the comment page on his website (http://www.kirk.senate.gov/?p=comment_on_legislation) or by calling his office at 202-224-2854.