Obama pushes protections for retirement accounts
NEW YORK (CNNMoney) -- President Obama says he wants greater protections for retirement investing.
He unveiled broad strokes of a proposal Monday that would hold financial advisers handling individual retirement accounts (IRAs) and 401(k)s to a higher standard than they currently are.
The change means financial advisers would be held to a so-called fiduciary standard. Translation: They would formally have to put the best interests of their clients ahead of their own interests by recommending the best product -- even if that means taking a smaller fee for their services.
The President acknowledged that many financial advisers already do that, but it wants to extend the standard industrywide.
\"There are no uniform rules of the road that require retirement advisers to act in the best interest of their clients,\" he said. That leaves openings for advisers who make a profit by \"taking advantage, bilking hard-working Americans out of their retirement money.\"
Conflicts of interest can cost investors 1 percentage point off their return each year, the White House estimated. Over time, that can add up to a lot of money.
Nationwide, the potential losses amount to $17 billion lost every year, according to President Obama's Council of Economic Advisers.
The financial industry has been wary of the proposal.
\"This proposal would lead to a number of negative consequences for individual investors, including limiting investor choice, limiting investor access to education regarding retirement accounts, and increased costs for saving,\" said the Securities Industry and Financial Markets Association, an industry group.
The president spoke about the proposal Monday afternoon at the Washington offices of AARP, the retirement association. He was joined by Senator Elizabeth Warren, who has become known as a consumer advocate.
The administration said more details would be available in several weeks when the official rulemaking process begins. It first proposed expanding the fiduciary responsibility standard to a broader category of investment professionals in October 2010.