WASHINGTON (TheStreet) — Government officials call proposed restrictions on retirement-plan advice a strike against unreasonable fees and a necessary protection for consumers. But detractors say the rules would limit investors' choices and potentially hurt thousands of financial firms.
On Friday, the U.S. Department of Labor announced its pursuit of new rules "designed to enhance retirement security and transparency" for those covered by 401(k), pension and other retirement arrangements. The proposed reforms came from the White House's year-long Middle Class Task Force.
The regulations would prevent investment advisers from slanting their advice for their own financial benefit. Advisers would be required to disclose their fees, and computer models used to offer advice would have to be certified by the government as "objective and unbiased." Advisers allowed to provide guidance would receive flat fees that don't vary based on the securities the participant picks.
The Labor Department estimates that 2 million workers and 13 million owners of individual retirement accounts, or IRAs, would benefit from the rules, which would save $6 billion a year in reduced fees and other costs.
Public comments on the changes are being accepted until May 5.
"These rules will strengthen America's private retirement system by ensuring workers get good, objective information," Deputy Labor Secretary Seth Harris said in a statement. "When that happens, workers make the kind of decisions that are good for their families and the nation as the whole."
That enthusiasm isn't shared by everyone in the investment community.
"The proposed regulation, if approved, will do little to expand American's access to investment advice," said Elizabeth Varley, managing director of government affairs for the Securities Industry and Financial Markets Association. "Americans are seeking the best paths to saving and investing for their retirement and deserve rules that allow them to do so. This move by the Department of Labor will hurt participants and investors, not help."
The Labor Department estimates the proposed regulations would affect 16,000 investment advisory firms.