The bill would provide explicit protections to employers for offering investment advice, but critics are more concerned about the part that would allow investment management firms to provide investment advice to participants for a fee, alongside “appropriate” disclosures.
Proponents say the bill would provide encouragement to employers to offer advice to their participants, result in more options for workers, and a potentially lower cost for the service. Critics are concerned that participants will suffer from “biased” advice that will simply enrich money management firms. And while proponents acknowledge there are risks , they note that the risk of doing nothing looms larger.
This week we asked our readers for their opinion on the bill — would the additional protections help sponsors and participants, or would it make a bad situation worse.
While the overall response rate was down from our normal pace, our respondents were firmly in favor of taking steps to expand investment advice — 68% in favor, in fact. Not that the remaining 32% weren’t just as concerned about the dangers of allowing “biased” providers to promote their own funds — there just weren’t as many.
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“Permitting money management firms to give advice is insane. The conflict of interest is just too high.”
“This is what we need. Get on with it. Let employers provide the needed advice that all employees need. Make it simple. If necessary separate the issues of “employer liability” and
“conflicted investment managers” into two issues. Help employees by releasing employers from fear of inappropriate liability.”
“I can appreciate that there are other risks associated with allowing someone else who may have (what in my mind amounts to) a conflict of interest. However, I do agree that the risk of doing nothing is far greater. Perhaps if the industry at large were to change practices and pay straight salaries instead of commission based wages, you might feel more comfortable that you were getting largely unbiased advice.”
“The question then is which is better, biased advice or no advice at all. Most US citizens have no training in money management. They leave high school unable to even balance a checkbook. But these same people are expected to be able to choose among the offered plan funds for their retirement savings?.”
“If the Investment Management firms are permitted to offer “objective advice” in the near future (due to the wisdom & “oversight” of Congress) …How long will it be before the ADVICE ONLY firms of today begin to offer their own shopping-list of investments? Maybe we don’t know how long…but we do know WHY! I think we are all aware that the Investment Management fees are greater than the Advice Only fees?.”
“Considering how many people are underfunded for their retirement, how many people are saving in GICs or cash, and that the primary source of 401k advice is friends by the water cooler I fail to see how this could harm participants. Even taking advice that puts folks in less than stellar funds will benefit them in the long term.”