White House cracks down on shady retirement plan advisers
The Obama administration is cracking down on financial advisers who may be using a loophole in the law to exploit and make extra money off their clients.
Under the current system, financial advisers may be receiving backdoor payments for steering their clients into an investment that pays more for the adviser and less for their customers,” Senior White House adviser Valerie Jarrett wrote in an article in LinkedIn recently.
She explained that investors could convince clients to buy and sell investments just so they could collect hidden fees or manipulate them from low-fee to higher fee plans.
To combat this activity, the Department of Labor is planning to update a 40-year old rule known as a “fiduciary” standard requiring retirement advisers to elevate their clients’ interests above their own. It is proposing to require those who manage individual 401k and IRA accounts to make certain disclosures or be subject to penalties.
The Department of Labor has also launched a new education campaign to warn consumers about these “conflict of interest” situations: