In That TV Ad, What Exactly Are Those Parents Worried About?
If you watch the news shows on Sunday mornings, or cable news at night, you've probably seen that ad where parents are dropping off their daughter at college. And then they start to fret about, well, something involving access to investment advice.
The ad ends by urging you to "Tell Congress: Fix this now."
A similar commercial spotlights a worried small-business owner whose truck is painted with that same urgent message. But what is "this" and why does it have to be fixed "now," in August? Huh?
What 'This' Is
This equals a new set of tougher rules for retirement investment advisers.
For years, the Labor Department has been studying rules involving the 401(k) accounts and IRAs that workers use to save for retirement. The department has concluded that too often, financial advisers don't give workers the best possible guidance because of conflicts of interest.
That is, the adviser may steer you into an investment that pays him a hefty commission, but doesn't maximize your savings. "Clients are sometimes unaware of these payments because they can be hidden in fine print or not disclosed at all," the Labor Department says.
An analysis by the White House Council of Economic Advisers concluded that these financial conflicts of interest result in collective annual losses of about $17 billion for consumers.
So the department is proposing rules, to be implemented next spring. The goal is to place a "fiduciary duty" on advisers, requiring them to put the clients' best interests first, not their own commissions. If they fail to do that, then their "firms can expect to be held liable for their breach of trust," the Labor Department said.
Consumer groups and AARP are strongly in favor of the changes. "The time is long past to ensure that advice provided to those who spend a lifetime working to save and invest for a secure retirement is in their sole interest," according to AARP.
What Does 'Fix' Mean?
The TV ads are backed by a coalition of financial advisers, life insurance agents and insurance companies (which sell annuities). They want the Labor Department to drop these proposed changes, or at least tone them way down. In other words, "fix" them before they do harm.
Coalition members say that under current rules, advisers play an important role in educating consumers about investment options. Moreover, they help small businesses offer workplace retirement plans.
Changing to the new rules would "would severely restrict access to information and education about annuities — curtailing families' ability to secure their financial futures with guaranteed lifetime income," according to the American Council of Life Insurers.
This coalition's website features the TV ads, which are labeled: "Paid for by Americans to Protect Family Security, Inc."
Earlier this month, the Labor Department held a marathon series of hearings, where scores of experts and advocates expressed their views. Normally, August is a quiet time in Washington, so it was somewhat unusual for so many people to be lobbying so hard for their position.
At this point, the changes are going through a rule-making process where regulators are still listening to concerns and seeking ways to make proposed rules more workable. So the issue is not really on Congress' plate.
However, Washington is a very political town. And if lots of Americans start contacting senators, it could motivate Congress to get more involved later this year and start threatening action of its own. But that seems unlikely because the congressional calendar already is extremely crowded for this fall.
Still, increasing congressional pressure could push the Labor Department to tweak the rules before they get implemented. And that's really what those ads are about.