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A new report published by the Economic Policy Institute argues that the delay of a Department of Labor retirement savings account conflict-of-interest rule will hit average Americans hard. Less than 15 days into his term, President Donald Trump ordered the Department of Labor to delay the implementation of this provision for at least two months-a move that will cost middle-class retirees billions in savings while lining the pockets of Wall Street firms.
The conflict-of-interest rule, also known as the fiduciary rule, is a new protection that requires retirement advisors to act in their clients' best interests. For every seven days of delay, people saving for retirement stand to lose $431 million over the next 30 years, the report found. A full 60 days of delay will cost future retirees $3.7 billion. Each additional 30-day delay would cost an additional $1.85 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 Heidi Shierholz, policy director for the EPI, a progressive think tank. "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," adds Shierholz, a former Labor Department chief economist.
The Obama administration unveiled the rule last spring the after a prolonged uphill battle against the powerful financial services industry. The rule, which was scheduled to go into effect in April, aims to stop unscrupulous advisors from steering retirement savers toward subpar products with excessive fees that give advisors lucrative commissions and other incentives.
The Department of Labor estimated that bad advice from retirement advisors costs retirement savers as much as $17 billion a year.
A Center for American Progress report found excessive fees on retirement investments could force a person to work three additional years before he or she can retire comfortably. The delay also comes amid a growing crisis fueled by underperforming 401(k) retirement savings accounts-a trend that hits black and Hispanic workers particularly hard and widens the gap between those who can and can't afford to retire on time.
The rule's supporters fear that the delay signals its imminent demise. Alexander Acosta, Trump's labor secretary nominee, has not stated his position on the rule. Democratic senators are expected to prod him on the issue during his upcoming confirmation hearing.
If the views of Trump's closest economic advisors are any indication, the rule could indeed be at risk. Former Goldman Sachs executive Gary Cohn, who now heads Trump's National Economic Council, has said that the fiduciary rule handcuffs banks and limits consumer choice.
"We think it is a bad rule. It is a bad rule for consumers," Cohn said. "This is like putting only healthy food on the menu, because unhealthy food tastes good, but you still shouldn't eat it because you might die younger"-a ludicrous argument since most savers do not solicit retirement advice thinking that they must guard themselves against being ripped-off.
This move is more business as usual from the Trump administration, which promotes Wall Street deregulation as a way to line the pockets of the one percent while conning everyone else. In this case, it's at the expense of the future retirees who stand to lose out on billions.
Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives' age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren't made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.
