A last-minute Bush administration regulation that would permit advice in 401(k) plans was called into question Tuesday by a number of consumer advocates and other experts who testified before the House Committee on Education and the Workforce.
The proposal, finalized on Jan. 20, would potentially permit plan administrators to give self-interested financial advice to participants. Witnesses testified that it would permit financial advisers to charge higher fees and give conflicted investment advice on products in which they have a financial interest.
If workers receive investment advice, it should be independent and free of conflicts of interest, said U.S. Rep Rob Andrews (D-N.J.), chairman of the subcommittee. During a time where American workers have already lost $2 trillion in assets due to last years market downturn, exposing their hard-earned retirement savings to greater risk by allowing advisers to offer them conflicted advice is irresponsible and imprudent.
Mercer Bullard, founder of Fund Democracy, said, Rather than promote the providing of independent financial advice to participants, the [new regulation] will promote conflicted advice, higher fees and lower investment returns.