A recent Blomberg News article by reporter Robert Schmidt addressed assistant secretary at the U.S. Labor Department, Phyllis Borzi’s fight to tighten the standards for Brokers investing retirement accounts. Below are excerpts from that article.For a full view of the article go to http://www.bloomberg.com/news/2014-06-18/cobra-s-mother-takes-on-wall-street-in-fight-over-401-k-s.html
How Americans save for their latter years has changed vastly since Labor first set rules for retirement funds in the 1970s. Many workers had employer-controlled pensions and the 401(k) didn’t exist. Now, pensions are rare and tens of millions of people rely on their 401(k) plans and IRAs, which together hold almost $11 trillion.
According to Phyllis Borzi, assistant secretary at the U.S. Labor Department, those resources are increasingly needed. Some 10,000 people will turn 65 every day from now until Dec. 31, 2030,
Borzi is fighting to protect those precious dollars. She has long argued that people’s retirement savings can be eroded by high fees or imprudent investments recommended by advisers with hidden incentives. She is pushing for brokers to be held to a legal standard that they must act in a client’s best interest, an obligation known as a fiduciary duty.
Brokers are held to a "suitability" standard, meaning they must reasonably believe their recommendation is right for a client. Investment advisers operate under the fiduciary standard, which imposes a much tougher overall responsibility for the customer’s welfare.