A New 'Duty' for Financial Advisers

SMITH BRAIN TRUST -- The Obama administration has finalized a new rule that places tougher restrictions on people managing retirement funds. The rule, to be fully implemented as of January 2018, declares that advisers have a "fiduciary duty" to their clients. That means that after analyzing two potential investments with equivalent returns, advisers will be required by law to tell a client to pick the one with the lowest fees. The White House Council of Economic Advisers estimates that consumers lose $17 billion annually because they're steered into high-fee funds.

Congressional Republicans have pledged to delay, if not stop, the new rule, which they describe as big government meddling that will hurt consumers. Fearing unfair punishment, experts may elect not to help small-scale investors. "Regulators could have achieved a similar result by forcing brokers to be more transparent about the fees they earn on their recommendations," says Kristen Fanarakis, assistant director of the Smith Schools Center for Financial Policy. "People tend to vote with their feet when given full information."