Brokers No Longer Allowed to Scam You on Your IRA Investments

Facts matter: Sign up for the free Mother Jones Daily newsletter. Support our nonprofit reporting. Subscribe to our print magazine.


After six years, a new rule requiring brokers to act in their clients’ best interests has finally gone into effect:

The fiduciary rule is aimed at curbing billions of dollars in fees paid annually by small savers who transfer money out of 401(k)s, which are required to operate in their best interests—and into individual retirement accounts, which aren’t currently bound by such protections. There, savers may be working with financial-product salespeople who earn more selling certain products and don’t have to put their clients’ interests before their own.

Administration officials intend it as a direct attack on what they consider “a business model [that] rests on bilking hard-working Americans out of their retirement money,” Jeff Zients, director of the White House National Economic Council, told reporters Tuesday.

….“Unless we see fundamental changes, this rule will remain unworkable, and we will consider every approach to address our concerns,” David Hirschmann, head of the U.S. Chamber of Commerce’s capital-markets division, said in a statement Tuesday. The chamber has said it was considering a lawsuit to block the regulation.

Unworkable! Sure, brokers have been following this rule for years with 401(k) plans, but extending that to IRAs will bring Wall Street to its knees. That’s despite a wide range of concessions from the administration after it received comments on the proposed rule:

Mr. Perez said, for example, that an employee of MetLife Inc. wouldn’t be obligated to advise clients about offerings from a competitor, like New York Life….To cut down on paperwork that industry officials said would be too burdensome, the new version of the rule only requires that firms sign one “best interest contract” with clients when they open an account.

….The latest rule also clarifies that brokers and others can continue offering a wide range of guidance without having to clear the “fiduciary” bar for “advice.” It specifies that investor education isn’t considered advice, allowing companies to continue providing general education on retirement savings. Also excluded from the advice category are general circulation newsletters, media talk shows and commentaries as well as general marketing materials.

Hmmm. “General education.” I have a feeling these are going to be boom times for general education. Stay tuned.

THE TRUTH...

is the first thing despots go after. An unwavering commitment to it is probably what draws you to Mother Jones' journalism. And as we're seeing in the US and the world around, authoritarians seek to poison the discourse and the way we relate to each other because they can't stand people coming together around a shared sense of the truth—it's a huge threat to them.

Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

payment methods

THE TRUTH...

is the first thing despots go after. An unwavering commitment to it is probably what draws you to Mother Jones' journalism. And as we're seeing in the US and the world around, authoritarians seek to poison the discourse and the way we relate to each other because they can't stand people coming together around a shared sense of the truth—it's a huge threat to them.

Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate