President Barack Obama is pushing ahead with a hotly contested rule to require more financial advisers to provide only advice that’s in the best interests of their clients — a standard that’s sure to invite more conflict with business groups and Wall Street, but that will also solidify his support among Elizabeth Warren and other Democratic populists.

In a speech to AARP on Monday, Obama will announce he’s telling the Labor Department to advance a proposed regulation that would apply the “fiduciary” standard to a wider circle of retirement advisers, rewriting rules that the administration says have become badly out of date since they were written in the 1970s.


The Labor Department has been working for years on the rule, arguing that the “fiduciary” standard needs to apply more broadly now that so many Americans determine their own retirement investments through 401(k) plans and individual retirement accounts (IRAs).

Now, the rule is becoming part of Obama’s “middle class economics” agenda, as the White House argues that Americans are being ripped off by compensation incentives that lead some retirement advisers to put their own profits ahead of their customers’ interests.

Obama’s announcement will leave no question which wing of the Democratic Party he’s rallying to his side. He’ll be joined at the AARP event by Sen. Warren (D-Mass.), along with Consumer Financial Protection Bureau Director Richard Cordray, to outline a proposal that’s heavy on criticism of Wall Street.

Administration officials are already setting the stage by slamming some financial advisers for steering customers toward “hidden fees” and “backdoor payments” that can leave their retirement savings thousands of dollars short. They’re not giving any examples for now, though — they say those will be detailed in the proposed rule.

“Today, unfortunately, too many financial advisers have sales incentives to steer responsible Americans into bad retirement investments with high fees and lower returns that leave their clients with less in retirement,” National Economic Council Director Jeff Zients said on a conference call with reporters Sunday. “Even if you’ve saved what you could and responsibly tried to prepare for retirement, you could end up with tens of thousands of dollars less simply because your adviser isn’t required to put your interests first.”

Labor Secretary Tom Perez says the proposed rule will go to the Office of Management and Budget for review on Monday, and will come out “in the next few months” — after which there will be a public hearing so the financial industry, consumer groups and others can provide more feedback. Perez insisted, however, that he has already conducted “robust and inclusive outreach” to get their input before writing the rule.

“If you have a serious illness, you don’t want your doctor telling you what’s suitable for you. You want that doctor to tell you what’s best for you,” Perez said. Likewise, he said, consumers who are looking for advice on retirement investments “deserve to know that their financial advisers are looking out for their best interests.”

But the idea of the rule has been controversial for years, and the Labor Department had to withdraw a 2010 version of the regulation under fire from the investment industry as well as some congressional Democrats. Business groups insist that the broader standards could limit the kinds of investment advice consumers get — and, of course, Wall Street firms are worried about profits.

The Securities Industry and Financial Markets Association (SIFMA), a top Wall Street lobbying group, on Sunday reiterated its criticisms of the Labor Department’s efforts.

“The DOL re-proposal could ultimately raise the cost of saving and hurt all Americans trying to save for retirement,” SIFMA president Ken Bentsen said in a statement.

Administration officials, however, insist that the old rules make it hard for financial advisers to compete when they do put their customers’ best interests first. Perez said he has talked to plenty of financial advisers who already do that, and said their biggest frustration with the current rules is that there is “not a level playing field.”

Perez said the new rule will include an economic analysis of its likely impact — a feature that wasn’t included in the original version — and will also add a list of exemptions. “The proposal will reflect the significant input we’ve received from stakeholders across the board,” he said.

To bolster its case, the administration released a report from the Council of Economic Advisers that outlines the damage when workers are steered into IRA accounts with higher fees. The report says a typical retiree, drawing down his savings over 30 years, loses 12 percent of the value of those savings if he received financial guidance from an adviser with a conflict of interest.

Perez says he’s prepared for criticism from congressional Republicans, but insisted that there are “no final decisions” in the proposed rule and that there will be “ample opportunity for additional input from the public, including but not limited to members of Congress.”

“We’ve met with just about everyone I can think of,” said Perez. “I’m a firm believer that rulemaking works best when we construct a big table and allow all of the stakeholders to weigh in.”