In a proposed bill currently making its way through Congress, mutual fund companies will be allowed to offer investment advice to employees participating in retirement plans that are sponsored by their employers, according to The Boston Globe.
But some don't think fund companies are capable of offering unbiased advice.
Under the current law, mutual fund companies are prohibited from giving advice directly to 401(k) plan participants for obvious possibilities of conflict of interest. The fear is that companies would steer investments into their own funds whether or not it was truly the best investment option.
"If you are going to make money based on where an individual puts their investments, then that's a conflict," said Jeff Maggiocalda.
Representatives from both Fidelity and Vanguard said they back the proposed bill because of the interest displayed by 401(k) sponsors to make more advice available to their employees.
"Plan sponsors would like a clear stamp of approval" for fund company advice, said Vanguard retirement principal Dennis Simmons.
Although similar proposals have been made in the past and have been rejected, this proposal is getting more attention and perhaps even more resistance.
Shaun O'Brien, a policy analyst for the AFL-CIO, believes that this type of a change is not necessary because many funds have partnered with independent advisers anyway.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.