To prevent those saving for retirement from paying higher fees, the Department of Labor publishedtheConflict of Interest Rulelast April. It requires that all financial advisers dealing with retirement accounts act as fiduciaries and look out for their clients' best interests. The rule is being phased in and wont be fully enforced until January 2018.
In the meantime, opposition to the fiduciary rule is mounting. On Wednesday, the US Chamber of Commerce and several investment industry groups filed a lawsuitto prevent the rule from being enforced. They claim that the rule makes it more difficult for smaller investors to afford retirement advice. The reason, they argue, is that paying commissions on smaller amounts could end up being less expensive than paying a fixed or asset-based fee often charged by a fiduciary.
Earlier this year, the US House and Senate, responded to those same arguments from the financial industry by voting against the rule.
Pamela Banks, senior attorney and program manager for Consumers Union,the advocacy and policy arm of Consumer Reports, says she isnt concerned about the mounting opposition. Thats partly because President Obama has vowed to veto any bill that tries to kill the measure.
Also, many financial advisory firms plan to meet the requirements of the rule anyway. A recent survey by Fidelity Investmentsshows that almost half of all investment companies have started to make changes to comply with the rule.
Sheryl Garrett, chief executive of Garrett Planning Network, which connects individuals with financial advisers who are fiduciaries, also says that businesses are adapting to the new requirements. "You either go out of business because you're not complying, or you step back and rethink how you can serve these clients in their best interest, she says.