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News from EPI Trump delay of the ‘fiduciary rule’ will cost retirement savers $3.7 billion

Today, Economic Policy Institute Senior Economist and Director of Policy Heidi Shierholz submitted a comment opposing the proposed delay of the Department of Labor’s “fiduciary rule,” which requires financial professionals to act in their clients’ best interests when recommending investment products or strategies to people saving for retirement. Perhaps surprisingly, it is currently legal in many cases for financial professionals to recommend higher-cost investment products that provide them with a higher commission but provide lower returns to their clients. The fiduciary rule would eliminate this conflict of interest.

Following a directive from President Trump, DOL proposed a two-month delay in implementing the rule. This delay will be enormously expensive to retirement savers—and not just during the period of the delay. As DOL itself notes, the losses that retirement savers experience from being steered towards higher-cost investment products during the delay “would not be recovered, and would continue to compound, as the accumulated losses would have reduced the asset based that is available later for reinvestment or spending.”

Every seven days that the rule’s implementation is delayed will cost retirement savers $431 million over the next 30 years. All told, the proposed 60-day delay will cost workers saving for retirement $3.7 billion.

“People who have worked hard to save for retirement need and deserve this common sense protection, which most people are shocked to discover isn’t already the case,” said Shierholz. “The only beneficiary of President Trump’s move to delay this rule is the financial industry, which wants to continue fleecing retirement savers for as long as possible.”

The Trump administration claims that delaying the rule will give it time to determine whether the rule would adversely affect the ability of Americans to gain access to retirement advice. This is a thinly-veiled tactic to kill the rule and allow the financial industry to continue taking advantage of retirement savers.

As part of the initial rulemaking process, DOL prepared a 382 page cost-benefit analysis examining in detail the expected economic impact of the rule. This was the culmination of a roughly six-year process that incorporated the feedback from four days of hearings, more than 100 stakeholder meetings, and thousands of public comments. Delaying the rule to revisit questions that have already been so thoroughly investigated is irresponsible and unjustifiable.

Conflicts of interest in retirement advice cost American families $17 billion a year. Delaying the fiduciary rule will simply mean business as usual as Wall Street firms continue to take advantage of working people.

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