The U.S. Department of Labor finalized a rule on Friday that would allow financial advisers affiliated with mutual funds and brokerage firms to give investment advice to 401(k) and IRA participants. The advisers will have to disclose how the company earns fees and the computer models used.
The Labor Department says the move would make investment advice more accessible. "Access to professional investment advice is particularly important now for workers as they manage their 401(k) plans and IRAs in changing and volatile financial markets," says Secretary of Labor Elaine Chao.
Some lawmakers say this rule will open the door for investment companies to offer advice that benefits financial services firms and not employees. U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, and Rep. Rob Andrews (D-NJ), issued a statement saying they will block implementation of this regulation. It reads:
“We are disappointed that the Bush administration moved forward to enact a new regulation that will make it harder for workers to receive fair and honest advice when making key financial decisions about their futures. With just a few hours to go, the Bush administration is still scrambling to give Wall Street a last-minute payback. Today’s regulation will allow financial services companies to reap windfall profits at the expense of workers and tips the scales towards special interests by opening the door to conflicts of interest among the very consultants purporting to offer unbiased investment advice. At a time when Americans are rightly concerned over their financial future, it’s unfortunate that the Labor Department is using its time to give special interests paybacks rather than working to actually help workers.”