President Barack Obama will direct the Department of Labour on Monday to proceed with new rules that would rein in conflicts of interests among Wall Street brokers who advise clients on retirement investments, administration officials said.
The change would mandate that brokers follow a "fiduciary standard" to prioritise clients' interests over brokers' interests, they said. The proposal is opposed by many Republicans and financial firms, which are fearful that the plan will limit broker compensation.
The move would cut back on "hidden fees" that financial advisers can pocket when steering clients into more expensive products that may not be the best option for the investor, officials said. Such practices cost working- and middle-class families $17 billion a year, according to the White House.
"The president will call on the Department of Labour to establish updated rules of the road to make sure that responsible Americans who are saving for retirement are getting a fair share of returns on their savings," Jeff Zients, Obama's top economic adviser, said in a conference call with reporters on Sunday.
The push for tighter rules fits into Obama's message of championing the middle class, a theme that is likely to dominate the 2016 presidential campaign. Obama will unveil his proposal during remarks hosted by the Association of American Retired Persons (AARP), which, along with labour and consumer advocacy groups, has lobbied for the rule change.
Seniors are an important voting bloc for both parties. Massachusetts Senator Elizabeth Warren, a consumer advocate who some Democrats hope will challenge former Secretary of State Hillary Clinton for the party's presidential nomination, is expected to attend.
The industry fears a rule change would curb compensation for brokers and would limit the types of investment products investors can get. Fierce lobbying by the industry forced the Labour Department to scrap its original proposal a few years ago.
"This re-proposal could make it harder to save for retirement by cutting access to affordable advice and limiting options for savers," said Ken Bentsen, president of the Securities Industry and Financial Markets Association, which represents banks and assets managers.