Ever had a conversation with a salesperson where you can’t quite pinpoint it, but you just don’t trust what they’re saying? They are trying to sell you something they claim is in your best interest, but you don’t believe them. It can leave people with a helpless feeling. Unfortunately, this can extend to retirement advice. Currently, advisors, brokers or insurance agents providing retirement advice must do so in their client’s best interest. However, there are loopholes. In October, the Department of Labor (DOL) announced a new proposed Retirement Security Rule to better protect Americans’ financial security. Rulemaking in the federal government can often go unnoticed. In this case, the White House held an event to highlight this proposed rule and its potential benefits for people’s income security.

The DOL rule looks to fix this problem by closing loopholes to ensure advice being provided is in accordance with their client’s best interest. For example, this rule would now apply to people who are switching jobs and rolling over their retirement savings accounts, which according to the White House impacts about five million people a year. In 2022, Americans rolled over about $779 billion from defined contributions plans into IRAs. The White House predicts that this proposed rule could increase retirees’ returns by 20 percent over a lifetime. An additional 20 percent in retirement savings can make a big difference in the lives of seniors. That money can be used to help defray from health care, nutrition and housing costs. Other areas this rule covers are commodities and insurance products like indexed annuities.

Those who fail to comply with their fiduciary duty as outlined in the DOL rule could face financial restitution and other financial penalties.

According to the DOL there is no official timeline for when the rule will be finalized, though it should go through a public comment period and hearing.

“Most financial advisers give their clients good advice at a fair price and are honest with them,” President Joe Biden said. “But that’s not always the case. Some advisers and brokers steer their clients towards certain investments, not because of the best interests of the client, [but] because it means the best payoff for the broker.” For instance, commissions for advisors regarding certain insurance products can be upward of 6.5 percent.

Like many policy changes, this proposed rule could be litigated in the courts. During the Obama administration, a similar rule was proposed, however, it was struck down by the federal court of appeals. However, the Biden administration contends that there are differences between the Obama rule and their own to withstand judicial scrutiny.

When seeking retirement advice, clients should feel the person they are paying is acting in their best interest. Sadly, this can’t be taken for granted. People work hard throughout their lives and deserve to maximize their retirement savings. Hopefully, this DOL rule will provide more assurances that their financial decisions will lead to a more secure retirement.

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Evan Carmen, Esq. is the Legislative Director for Aging Policy at the B’nai B’rith International Center for Senior Services. Click here to read more from Evan Carmen.