Americans trying to save for retirement might be pleased to learn that a new law expected next year will require something that sounds obvious: All financial advisers will be required to work in their clients' best interests. As Vox explains, that is "amazingly" not the case now. Two kinds of advisers currently exist: "Registered investment advisers," who tend to work with the wealthy, are held to high fiduciary standards akin to the standards of doctors and lawyers, and they must indeed work in the best interests of their clients. But the other group, "broker-dealers," are more like salespeople who work on commissions. They're required only to provide "suitable" advice, and there's nothing stopping them from steering their middle-class clients into high-fee products that result in fat commissions for themselves.
The Obama administration has been trying to tighten the law—to ensure that all advisers put their clients' interests above their own or their company's—and the spending bill that cleared Congress last week all but ensures it will happen. The financial industry had mounted a "last-minute battle" to kill the provision, but it fell short, reports the Wall Street Journal. As a result, the Labor Department is expected to draft the legislation in January ahead of its implementation later in the year. Proponents say that it will save people big money in their IRAs and 401(k)s, while the industry argues that it will drive many brokers out of business and thus put the price of getting investment advice out of reach for many. At Bloomberg View, meanwhile, former broker and SEC chief Arthur Levitt argues that the change is "long overdue." (Read more financial adviser stories.)