In the New York Times today, Paul Krugman discusses the "fiduciary rule" that the President last week ordered the Department of Labor to "reconsider."
Last week Mr. Trump released a memorandum calling on the Department of Labor to reconsider its new “fiduciary rule,” which requires financial advisers to act in their clients’ best interests — as opposed to, say, steering them into investments on which the advisers get big commissions. He also issued an executive order designed to weaken the Dodd-Frank financial reform, enacted in 2010 in the aftermath of the financial crisis.
Why, after all, was the fiduciary rule created? The main issue here is retirement savings — the 401(k)’s and other plans that are Americans’ main source of retirement income over and above Social Security. To invest these funds, people have turned to financial professionals — but most probably weren’t aware that these professionals were under no legal obligation to give advice that maximized clients’ returns rather than their own incomes.
This is a big deal. A 2015 Obama administration study concluded that “conflicted investment advice” has been reducing the return on retirement savings by around one percentage point, costing ordinary Americans around $17 billion each year. Where has that $17 billion been going? Largely into the pockets of various financial-industry players….
The full article is here.