The House of Representatives passed legislation Thursday in an attempt to stop a Labor Department rule from going into effect which requires financial retirement advisers to put their client’s interests ahead of their own earning potential.
The Conflict of Interest Rule — also known as the fiduciary rule — was finalized April 8, but may not go into effect until as late as January 2018.
Specifically, the Labor Department will require investment professionals who handle rolled-over 401(k) plans, new IRAs and other retirement investment funds to disclose their commission payments for each financial product offered to clients.
“I think it has the absolute potential to be huge and game-changing,” said Knut Rostad, president of the Institute for the Fiduciary Standard.
The bill passed in the form of a joint resolution under the Congressional Review Act, 234-183, but faces stiff resistance with a 60 vote threshold need to be met in the Senate, and at the White House where the president has also promised a veto.
Congressional Republicans and financial industry advocates argue that the new regulations will increase compliance costs for firms and ultimately raise fees for investors. The Rule’s opponents have been pushing against its implementation for six years now.
According to the Labor Department however, bad investment advice costs Americans $17 billion per year.
While the intentions of the new fiduciary regulations are well-intended, it remains to be seen how smoothly brokers make the transition and what the consequences of increased expenses will be for the average investor.
[Bloomberg] [MarketWatch] [Photo courtesy benefitspro.com]