Regulations Proposed to Protect Retirement Accounts

Federal regulators have proposed rules intended to protect investors' retirement savings accounts from investment planners who do not always act with their customers' best interests in mind. Drawing on academic research, the White House has found that lack of investor protection has cost investors $17 billion annually. Proposed rules would close some of the loopholes which allow brokers to avoid taking on fiduciary responsibilities when giving advice on retirement accounts.

These rules would would update the Employee Retirement Income Security Act, which was enacted in 1974, when many retirees could still rely on pensions. Today, retirees are increasingly dependent on a 401(k). They become especially vulnerable when they turn a 401(k) account, previously managed by their employer, into an individual retirement account. Brokers who advise them on that transaction do not necessarily have to act with their customers' best interests in mind; this can lead to the loss of thousands of dollars for retirees who may end up paying higher commissions as a result. Erisa, as it is currently written, does require that brokers act according to a fiduciary duty when dispensing advice, but "advice" is narrowly defined. The proposed rules would broaden the meaning of advice to include any professional receiving compensation for providing individualized advice.