By Lisa Lambert and Tariro Mzezewa
WASHINGTON/NEW YORK (Reuters) - The Obama administration will release a long-awaited proposal on retirement advice on Wednesday, according to a person familiar with the matter.
At an event at the Center for American Progress think tank, the U.S. government will unveil its proposed rule requiring brokers who provide retirement advice to follow a "fiduciary" standard of putting clients' interests before their own.
The proposal aims to end potential conflicts of interest by brokers who advise on individual retirement accounts and to protect consumers from buying unnecessary investment products.
Required by the 2010 Dodd-Frank Wall Street reform law, the rule has followed a tortuous path toward fruition.
Financial companies and lawmakers have worried that the rule's requirements could drive up costs and keep middle- and low-income people from being able to afford retirement services.
The Labor Department, which regulates retirement plan advice, withdrew its initial proposal in 2011 after criticism from the financial services and insurance industries and leaders in both political parties.
A new version was proposed a year ago after a nudge from President Barack Obama and discussions with the industry and lawmakers, who considered blocking funds needed for a standard.
In January, the Labor Department finished work on the rule and sent it to the White House's Office of Management and Budget for review.
Even though the text was not released, both Washington and Wall Street have been preparing for a possible fight over the latest version. Last month, the U.S. Chamber of Commerce said it is prepared to sue the federal government if it finds the rule unworkable.
"The DOL has been very prudent about how they’ve gone about this in trying to make their rule litigation-proof, but opponents will sue in court,” said Scott Puritz, managing director of retirement services firm Rebalance IRA.
Despite publicly opposing the rule, many money managers have privately been preparing for its release for several months. Firms including LPL Financial Holdings have been cutting fees and reducing the amounts clients can hold in their brokerage accounts, all in preparation for the rule.
"The advice I've been giving broker-dealers and advisers is to get in front of the rule and explain it to clients now because after the rule is out, they'll sound defensive," said John Anderson who works with financial advisers at SEI Advisor Network, part of at SEI Investments Co..
The Labor Department and Center for American Progress did not respond to requests for comment.