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Rule change on retirement advice

Wednesday, April 06, 2016 - 01:23

A new rule from the Obama administration aims to end conflicts of interest by brokers and protect consumers from being sold unnecessary investment products. Bobbi Rebell reports.

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The U.S. government unveiled a new rule aimed at protecting consumers when it comes to their retirement savings. U.S. Labor Secretary Tom Perez (SOUNDBITE) TOM PEREZ, UNITED STATES LABOR SECRETARY, (ENGLISH) SAYING: "Today's rule ensures that putting clients first is no longer simply a marketing slogan. It is now the law." Under the rule, broker-dealers who provide advice will be required to follow a 'fiduciary standard.' Brokers have to act in clients' best interest, a higher standard than the previous one which only required that investments be 'suitable', based on a client's age and risk tolerance. The goal is to increase transparency and avoid conflicts of interest. The controversial rule was softened in response to industry complaints, for example limiting the paperwork involved in the disclosures, and allowing some in-house investment products. The new rule will still hurt profitability, according to Michael Spellacy leads the Global Wealth Management practice at PwC: (SOUNDBITE) MICHAEL SPELLACY, SENIOR PARTNER, PWC, (ENGLISH) SAYING: "We substantially expect to see across the industry industry structure start to evolve a little bit and also consolidate. We've seen that recently with some of the insurers exiting parts of the business around direct sales, and we expect to see further consolidation, especially amongst the smaller players as the cost and the compliance activity around this starts to make its way through the industry." The new rules will take full effect on January 1st of 2018.

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Rule change on retirement advice

Wednesday, April 06, 2016 - 01:23