Brokers Fight Rule to Favor Best Interests of Customers
Turtle And Scorpion.
David O’Brien, a certified financial planner, has tried to repair the retirement portfolios of several victims over the years. There was the high school science teacher who didn’t realize she had been sold a variable annuity, where layers of incomprehensible fees devoured nearly 2.5 percent of her retirement savings each year. Then there was the woman fighting cancer, who was also sold a high-cost annuity, but whose underlying investments were tied up in a money-market type fund — one that cost 1.5 percent annually.
In many cases, he explained, brokers made their sales pitches where these people worked, which put them at ease. “They send their local representatives to meet with you and they make it seem like this normal thing — you fill out the forms because you are retiring,” said Mr. O’Brien, who works in Midlothian, Va. “And then a few years later, you meet with me and you don’t even realize you were sold two variable annuities inside an I.R.A.”
Brokers are not necessarily required to act in their customers’ best interest, even if they are advising on their retirement money. While that would seem to be a basic consumer protection, in Washington and on Wall Street it has proved to be wildly contentious.
Amid fierce pushback from the financial services industry, the Labor Department, which oversees retirement plans, recently delayed releasing a revised proposal that would require a broader group of professionals to put their clients’ interest ahead of their own when dealing with their retirement accounts. The department said it would release the proposed rule in January, according to its regulatory agenda, instead of this August. (Phyllis C. Borzi of the Labor Department, had signaled that it could miss the deadline.)