Critics of the Pension Protection Act, now pending in the Senate, fear that by allowing mutual fund, brokerage and insurance companies to steer workers into specific options in 401(k) plans through the guise of advice--they will only foist their own wares on them, The Wall Street Journal reports.
"Everything that has happened in the securities industry the last five years, all these scandals, at the heart of it was a conflict of interest," said David Kudla, chief executive of Mainstay Capital Management, which administers $500 million in retirement assets. "Given the regulatory track record, how can anyone think this is a good idea?"
But the fund industry, for whom this would be a tremendous boon, says the marketplace itself would penalize firms offering biased advice. And brokerage companies that have shed their asset management arms note that they don't have proprietary products to offer.
They also note that although employers may currently hire third-party advisors to provide unbiased advice, many do not, fearing lawsuits since the current law states that any entity that gives advices bears a "fiduciary duty."