This afternoon, Senior Advisor to the President Valerie Jarrett posted the following message on LinkedIn, explaining why the President is taking action to address the "conflicts of interest" that are currently costing American workers millions in retirement savings.
Check out the original post on LinkedIn here.
Thanks to the grit and determination of millions of American workers, America is experiencing resurgence — and every single responsible worker in this country deserves the security of a dignified retirement.
You work hard every day to make ends meet and put a little away for yourself -- for a much-needed vacation, college tuition for your children, or – your retirement. If you’re working hard to build a nest egg for your future, you should have the peace of mind that you’re receiving the most out of your savings and that your hard-earned investment is protected. As the President has said, this country does best when everyone gets their fair shot, everybody does their fair share, and everyone plays by the same set of rules.
But right now, you might be surprised to hear that there are no rules to ensure that your financial advisers who invest your savings are acting in your best interest. If you’re one of the more than 75 million families who are investing in an Individual Retirement Account (IRA) or employer-based plan, you could be losing out on tens of thousands of dollars in savings because your financial adviser is looking out for his best interest, not yours.
For example, instead of directing you to a low-cost, high-return plan that does the most for your money, your financial adviser could be directing you to a high-cost, low-return plan that does not maximize your return on your investment. Why? Because, under the current system, financial advisers may be receiving backdoor payments for steering you into an investment that pays more for the advisor and less for you. They could buy and sell investments more often than advisable just to collect hidden fees, or they could shift your existing savings from low-fee plans into higher cost ones.
It’s called a “conflict of interest.” It’s wrong. And currently, it’s legal. Take a look at this video to see exactly how conflicted advice may be costing you:
Overall, retirement savers receiving conflicted advice lose roughly 1 percentage point per year. This may seem small, but over a lifetime, that 1 percent could add up to a loss of more than a quarter of the savings a middle-class family could’ve otherwise built if they had received good advice. Taken together, American savers lose $17 billion a year due to conflicts of interest.
Like your doctor or your lawyer, your retirement advisor should be required to do what is best for you. That is why President Obama’s Administration is taking new action to protect hardworking families’ retirement security. The Department of Labor’s proposed updated rule, known as a “fiduciary” standard, will require retirement advisers to put the best interests of their clients above their own financial interests. Many already do. But this rule will give more Americans peace of mind and the tools to build a secure retirement, by giving families the assurance that their retirement advisers are putting them first.
Your savings are the bedrock of your economic security when you decide to retire. You should have every dollar that you’ve earned and the best return on your investment. Not a penny less. The President’s action will help empower you to make sure that your savings are protected and your future is secure.
Now, dig deeper: