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Another voice: Better financial advice for retirement

 
Published April 11, 2016

The road to retirement will be less rocky under new rules issued last week by the Labor Department. The rules require financial advisers to act solely in a client's best interests when giving advice and selling investments for retirement accounts. The best-interest requirement, also known as a fiduciary duty, will be a big improvement on current practice, in which many advisers are free to steer clients into high-priced strategies and products even when comparable but cheaper ones are available.

Better advice will mean better returns for investors. A report last year by the White House Council of Economic Advisers found that biased advice drained $17 billion a year from retirement accounts in excessive fees and inflated commissions. Under the new rules, which are scheduled to take effect a year from now, much of that money will remain with investors.

That's alarming for financial firms and insurance companies that profit from the current system and don't want to change. But the White House remained firm, giving full backing to Labor Secretary Thomas Perez, who moved methodically to address the industry's objections. Even so, financial firms, insurance companies or their trade groups are expected to challenge the new rules in court — suggesting that their aim all along was not an improved rule but no rule.

Until the new rules are fully in effect, investors must stay alert.