New Rule Pledges to Protect Americans Saving for Retirement

The U.S. Department of Labor has finalized a rule it says will protect the financial interests of millions of Americans saving for retirement.

The Retirement Security Rule updates the definition of an investment advice fiduciary under federal law.

To be considered a fiduciary, those who provide investment advice now must do so while avoiding recommendations that are in the advisor’s interest and at the client’s expense.

This new federal regulation, or rule, will go into effect on Sept. 23 and will govern interactions in which financial services providers give paid investment advice to:

• Retirement plan participants
• Individual retirement account (IRA) owners
• Officials who administer plans and manage assets

The rule also requires firms that oversee investment providers to put policies and procedures into place that ensure the advisors follow the guidelines intended to protect investors from conflicts of interest.

In a press release announcing the rule finalization, Julie Su — acting secretary of the Department of Labor — says:

“This rule protects the retirement investors from improper investment recommendations and harmful conflicts of interest. Retirement investors can now trust that their investment advice provider is working in their best interest and helping to make unbiased decisions.”

The new DOL rule is the successor to an Obama-era rule that also tried to mandate that financial advisors put their clients’ interests before their own. A court struck down that rule.

The new rule is less expansive than the one President Barack Obama’s administration crafted, according to a CNBC report.

Critics of the new rule say it will result in millions of savers finding it more difficult to secure professional financial advice.