We’ve joined AARP, the Consumer Federation of America, Consumer Reports, the AFL-CIO and other unions, Americans for Financial Reform, Better Markets and other leading groups to support an imminent Department of Labor rule proposal. The coalition’s new website explains the issues.

The rule will require retirement advisors (broker-dealers, insurance agents, others who provide retirement advice or sell retirement accounts) to put consumers first by establishing what is known as a “fiduciary duty” to their customers. It’s become more important to enact a rule like this since every year more and more workers face the responsibility of managing their own retirement savings, as defined-benefit pensions are replaced by defined-contribution or self-funded savings plans in the form of 401-ks and IRAs.

The proposal must be reviewed first by the Office of Management and Budget; after OMB sign-off, it will go out for public comment.

Wall Street brokerages and insurance companies have already launched a fierce lobbying attack, since they’ve long been putting themselves first by pocketing a significant chunk of what should be your retirement income by charging excessive fees or switching you from efficient retirement plans into ones that reward them more. Academic studies estimate the cost to the public at up to $17 Billion each year. Wall Street’s massive lobbying associations — The Financial Services Roundtable (FSR), the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI) — defeated a similar proposal during OMB review in 2010.

As AARP’s David Certner told Tara Siegel Bernard for her excellent New York Times explainer on the proposal last week titled “Making Brokers Toe the Mark:”

“The financial services industry’s resistance to the rule has ‘been constant and it’s been heavy, and they have already spent a fair bit of money preventing this rule from seeing the light of day. Unless the rule is completely watered down, I’d expect that to continue.’”

Tara’s story explains how loopholes in the law allow Wall Street’s brokers and agents to ignore fiduciary duties that apply currently only to a relatively small number of investment advisors. She also references a recent White House memo based on academic analysis of the rule proposal:

“’The current regulatory environment creates perverse incentives that ultimately cost savers billions of dollars a year,’ said the memo, dated Jan. 13, from Jason Furman, chairman of the White House’s Council of Economic Advisers, and Betsey Stevenson, a council member. And ‘many firms have organized themselves on the basis of capturing conflicted payments rather than the delivery of high-quality advice,’ they added.”

She goes on to interview one of the professors who co-authored one of the studies cited by the White House:

“‘They are influenced by how much they are paid, and larger payments can tilt a broker’s advice towards poor-performing funds,’ said Susan Christoffersen, one of the co-authors [of an academic study].”

Wall Street’s attack, so far, is following the same lines as in 2010. First, they are claiming that they won’t be able to provide advice to average Americans, who will be priced out of the market. Second, Wall Street brokers are hiring Wall Street lawyers to issue “studies,” as Debevoise and Plimpton did this week for the powerhouse Financial Services Roundtable. Third, they claim Labor needs to wait for the SEC (they don’t).  Finally, the big firms are dangling rural agents out on the front lines of their attack, rightly deciding that Congress may find these “small businesses” more sympathetic than they are.

Over at, you can study the Problem, learn the Solution and Take Action. The coalition’s “News and Resources” pages rebut the industry’s tired, special-interest, self-serving arguments, for example, their claim that middle class consumers will be on their own:

{MYTH] If brokers choose not to continue providing recommendations under the new rule, workers and retirees with modest accounts will be stranded without affordable investment advice to guide their retirement planning.

[FACT] In fact, investment advisers already exist who can and do serve middle income clients under a fiduciary standard, giving the lie to the basic premise of this argument. Furthermore, recommendations that are not based on the best interest of the investor do not constitute advice; such recommendations constitute a sales pitch misleadingly presented as advice. Eliminating such misleading practices will be an important benefit of the rule, not a drawback.

While OMB is often described as “the place regulations go to die,” we don’t believe that will happen this time, even though we fully expect Wall Street to blitz Congress with demands for “Dear Colleague” letters urging the White House and Labor to back down. Further, they’ll probably try to get Congress to pass some sort of law or budgetary restriction to directly prevent Labor from protecting your retirement savings from unfair practices.

Once the proposal gets to the comment stage, we’ll let you know how you can help make Wall Street put consumers first.

Written in conjunction with Ed Mierzwinski of USPIRG.


Deirdre Cummings

Legislative Director, MASSPIRG

Deirdre runs MASSPIRG’s public health, consumer protection and tax and budget programs. Deirdre has led campaigns to improve public records law and require all state spending to be transparent and available on an easy-to-use website, close $400 million in corporate tax loopholes, protect the state’s retail sales laws to reduce overcharges and preserve price disclosures, reduce costs of health insurance and prescription drugs, and more. Deirdre also oversees a Consumer Action Center in Weymouth, Mass., which has mediated 17,000 complaints and returned $4 million to Massachusetts consumers since 1989. Deirdre currently resides in Maynard, Mass., with her family. Over the years she has visited all but one of the state's 351 towns — Gosnold.