Labor Department expected unveil retirement brokers rule

Reuters News
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Posted: Apr 14, 2015 11:12 AM

By Sarah N. Lynch and Suzanne Barlyn

WASHINGTON (Reuters) - The Labor Department is expected to unveil as soon as Tuesday its long-awaited plan to curb potential conflicts of interest by brokers offering retirement investment advice.

The Labor Department announced it plans to publicly release details of a "consumer protection" rule at 3 p.m..

It did not elaborate on the rule's contents, but lobbyists and industry officials widely expect the announcement will detail the department's plan to hold brokers who offer retirement account advice to a higher "fiduciary" standard. That means they would be required to put investors' financial interests ahead of their own.

President Barack Obama threw his political muscle behind the proposal in February, saying Americans are too often the victims of hidden fees that are costing them billions of dollars each year in their retirement savings.

If ultimately adopted, it would have an impact on brokerages large and small, from independent shops to firms such as Fidelity, Wells Fargo, Charles Schwab and Raymond James.

The Labor Department has been working to develop a fiduciary rule for brokers for several years. The first draft was widely criticized by the industry, and the department was forced to scrap it and go back to the drawing board.

Wall Street has warned that overly strict rules could limit retirement products available to investors because fewer brokerages would be prepared to offer individual retirement accounts or advise lower-income Americans on them.

The industry also fears the new rules may fundamentally change the compensation structure for brokers by requiring more investors to pay fees based on a percentage of their assets instead of commissions.

That would hurt profits on such products and, as a result, brokers would pull back from offering accounts and advice, financial industry groups say.

(Reporting by Sarah N. Lynch; Editing by Bill Trott and Will Dunham)