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AARP Survey Shows Overwhelming Support for Requiring Investment Advice to be in Best Interest of Retirement Plan Participants

AARP survey shows overwhelming public support for requiring the advice they receive within the plan to be in their best interest

FOR IMMEDIATE RELEASE

September 10, 2013

CONTACT:

AARP Media Relations

202-434-2560 | @AARPMedia | media@aarp.org

AARP Survey Shows Overwhelming Support for Requiring Investment Advice to be in Best Interest of Retirement Plan Participants

Washington – A major new AARP survey shows overwhelming public support (93 percent) from American workers who participate in 401(k)-type retirement plans for requiring the advice they receive within the plan to be in their best interest, a policy referred to as “fiduciary duty.”  A similar percentage – 91 percent – favored requiring IRA providers to manage those vehicles in the best interest of account holders.

These are among the key findings in the AARP survey, conducted at a time when the U.S. Department of Labor (DOL) is considering updating and strengthening regulations to better protect American workers and their retirement nest eggs from the financial conflicts of interest of some investment advisors

With the shift from traditional pensions to 401(k) type plans over the last several decades, more and more people are on their own these days when it comes to making important decisions about their retirement savings.  These decisions can be complicated and many individuals turn to investment professionals for help.  

Most people assume that financial professionals provide investment advice based on the best interests of the person they are advising.  But that is often not the case.  Unless an advisor has a “fiduciary duty” – that is, a legal requirement to act in the consumer’s best interest – he or she could be providing advice that is more designed to improve their own financial prospects than the consumer’s.  This conflicted advice can have a significant negative impact on millions of Americans whose retirement security depends on their ability to save and invest successfully through workplace-based retirement plans.

“The stunning results in our study show that the average American wants to see required what they already often mistakenly believe, that the advice they receive from their financial advisor needs to be in their best interest,  and not in the best interest of the advisor,” said Cristina Martin Firvida, AARP’s Director of Financial Security and Consumer Affairs.  “We urge Congress to allow DOL to move forward on updating the rule to provide a consistent high standard of protection for American workers and their families.”

Martin Firvida noted that under current rules governing 401(k) type retirement plans, providers offering advice to individual participants may earn money based on the individual’s investment selections.

The survey was conducted May 24 to May 31 for AARP by GFK Custom Research and involved individuals 25 and older who had money saved in either a 401(k) or 403(b) plan.  The margin of error is plus or minus 3.3 percent. 

Among the other highlights:

1.      More than three in four (77 percent) respondents indicated that they are either “very concerned” or “somewhat concerned” by the fact that, currently, investment advice from 40l(k) or 403(b) providers is not required to be in the best interest of participants.

2.      A solid majority (62 percent) described themselves as either very or somewhat concerned by the fact that their plan provider can give advice and make money from the investments plan participants select.

3.      After having read a statement explaining that advice from plan providers is not currently required to be in the best interest of participants, half of respondents (50 percent) said that that information makes them “less likely” to trust their provider for advice.  Slightly over one third (37 percent) indicated that that disclosure has “no impact” on their level of trust.

Here is a link to the AARP study.

http://www.aarp.org/work/retirement-planning/info-07-2013/fiduciary-duty-and-investment-advice---attitudes-of-401-k--and-4.html.

AARP is a nonprofit, nonpartisan organization, with a membership of more than 37 million, that helps people turn their goals and dreams into real possibilities, strengthens communities and fights for the issues that matter most to families such as healthcare, employment and income security, retirement planning, affordable utilities and protection from financial abuse. We advocate for individuals in the marketplace by selecting products and services of high quality and value to carry the AARP name as well as help our members obtain discounts on a wide range of products, travel, and services.  A trusted source for lifestyle tips, news and educational information, AARP produces AARP The Magazine, the world's largest circulation magazine; AARP Bulletin; www.aarp.org; AARP TV & Radio; AARP Books; and AARP en Español, a Spanish-language website addressing the interests and needs of Hispanics. AARP does not endorse candidates for public office or make contributions to political campaigns or candidates.  The AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. AARP has staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Learn more at www.aarp.org.

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