More on a Proposed Rule on Retirement Savings
The New York Times, March 3rd, 2010
Last Friday, the United States Department of Labor proposed a new
rule governing investment advisers’ fees intended to help better
protect, and increase, workers’ retirement savings.
We covered some of the details and background of the proposed rule in
this
post. But here’s a bit more from one mutual fund shareholder
advocate on how the proposed rule varies from an earlier version
scratched by Democrats and what it may mean for consumers.
According to Mercer Bullard,
a law professor at the University of Mississippi School of Law and
founder of the Fund Democracy,
a advocacy group for mutual fund shareholders, the initial Department
of Labor rule specified only that the fees or compensation received by
an individual adviser providing investment advice not vary depending on
the investments selected by the participant and did not apply to the
adviser’s firm.
In contrast, the new provision of the rule applies the fee
limitations to both the adviser and his or her firm.
To illustrate the difference, Mr. Bullard pointed out the different
language in the two rules. Here’s the exact relevant language of the new
proposed rule: “No fiduciary adviser (including any employee, agent or
registered representative) that provides investment advice receives from
any party (including an affiliate of the fiduciary adviser), directly
or indirectly, any fee or other compensation (including commissions,
salary, bonuses, awards, promotions or other things of value) that is
based in whole or in part on a participant’s or beneficiary’s selection
of an investment option.”
And here’s the language from the earlier rule: “Any fees or other
compensation (including salary, bonuses, awards, promotions, commissions
or other things of value) received, directly or indirectly, by any
employee, agent or registered representative that provides investment
advice on behalf of a fiduciary adviser does not vary depending on the
basis of any investment option selected by a participant or
beneficiary.”
This is the gist for consumers: “You are much more likely to get
objective advice from your adviser” under the proposed rule, said Mr.
Bullard, who had critiqued
the earlier rule’s language.
Read more of this article.Professional Financial Advisers: As the new rules are implemented, you should consider how a financial adviser can potentially help you navigate retirement. Learn more about how the relationship works at NewRetirement.com