The Biden-Harris administration has introduced a regulation to safeguard the interests of individuals saving for retirement by modernizing the definition of investment advice fiduciary.

The Biden-Harris administration has announced the finalization of the Retirement Security Rule by the U.S. Department of Labor. This rule aims to protect the millions of workers who are diligently saving for retirement and rely on advice from trusted professionals on how to invest their savings. The updated definition of an investment advice fiduciary, which will take effect on September 23, 2024, will apply when compensated investment advice is given to retirement plan participants, individual retirement account owners, and plan officials responsible for managing their assets.

Under this rule, trusted investment advice providers must adhere to high standards of care and loyalty, giving prudent, honest advice free from overcharges. They must also avoid recommendations that favor their own interests at the expense of retirement savers. Financial institutions overseeing these providers must have policies and procedures in place to manage conflicts of interest and ensure compliance with these guidelines.

Acting Secretary Julie Su stated that this rule will protect retirement investors from improper recommendations and harmful conflicts of interest, allowing them to trust that their investment advice provider is working in their best interest. The Biden-Harris administration’s efforts to protect retirement investors and put more money into the pockets of workers and their families align with this rule. It seeks to prevent advice providers from prioritizing their own interests over their clients’ and ensure fair competition among investment professionals.

The Council of Economic Advisers’ analysis suggests that conflicted advice could cost savers up to $5 billion per year, reducing returns and increasing costs for retirement investors. This rule aims to prevent such conflicts and ensure that investment professionals are fairly compensated for helping clients meet their savings goals and retire with dignity. It also promotes a level playing field for all advice providers, regardless of the products they recommend. Firms and professionals who give advice in the best interest of retirement investors should not be penalized for responsibly managing their clients’ investments.  

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