text: You know setting aside money for retirement is smart, but you don’t know anything about how it works. You need advice. Where do you turn? 
   
   Maybe you have a financially savvy friend or family member. But a lot of people turn to professional advisers. 
   
   Until now there have been two different kinds of investment advisers: those who are required to work in your best interests, and those who — amazingly — are not. 
   
   But a new rule from the Department of Labor, which becomes final today, aims to change that. Under the new rule, savers will gain the right to sue or initiate arbitration against advisers who don’t meet high ethical standards or who fail to disclose conflicts. 
   
   The effect, say both experts and many industry advocates, will be to drive many advisers to change their business models, while pushing others entirely out of the business. 
   
   And that’s probably a good thing. 
   
   The new rule will require retirement advisers to act in their clients’ interests 
   
   The Department of Labor developed the new standards over the past few years, as part of a larger regulatory effort to reduce risk for middle-class savers after the 2008 financial crisis. 
   
   The two kinds of retirement savings pros are called "registered investment advisers" and "broker-dealers." Registered advisers — who often work with wealthier, more sophisticated clients — are required to uphold fiduciary standards, a special legal arrangement most often associated with lawyers and doctors. They are required to work in the best interests of their clients and can be punished for doing otherwise. Registered advisers are paid directly by their clients, and generally charge based on the size of the fund they manage. 
   
   "Broker-dealers," on the other hand, are often more like salespeople (a dealer is a broker who works independently). They’re often paid commissions, increasing their incentive to suggest products with higher fees. Many also receive "revenue-sharing" payments from the banks and mutual funds that generate the investments the brokers sell, again potentially influencing them to steer savers toward products that charge more. 
   
   The suggestions broker-dealers make to clients are held to a "suitability standard." That is, brokers are required to only propose products that are appropriate for the saver given his or her age, retirement goals, etc. 
   
   "I've never met anyone who's going to go to a dealership to ask advice about whether to buy a new car" 
   
   What brokers dole out is "advice" in the conventional sense, but the current rules don’t require it to be particularly good, or even fully well-meaning. 
   
   "A sales pitch where they're going to get a huge commission isn't ‘advice,’" says Betsey Stevenson, a professor of economics and public policy at the University of Michigan and a former member of the White House Council of Economic Advisers (CEA) who co-authored its report on the rule. 
   
   "Car salesmen get commissions, and everyone’s fine with that," she adds. "But I've never met anyone who's going to go to a dealership to ask advice about whether to buy a new car or take the bus." 
   
   Savers lose a lot of money because of conflicted advice 
   
   A decades-long shift from traditional pensions to 401(k) savings plans means more people than ever are responsible for deciding where to invest their own retirement savings. 
   
   The CEA’s report, published in February 2015, found that bad advice from conflicted broker-dealers reduced savers’ returns by about 1 percent a year — as much as $17 billion a year nationwide. 
   
   The greatest losses occur when workers roll their 401(k) balance into a higher-fee individual retirement account when leaving a job, rather than keeping it with their former employers. 
   
   "A typical worker who receives conflicted advice when rolling over a 401(k) balance to an IRA at age 45 will lose an estimated 17 percent from her account by age 65," the CEA’s report said. The report adds that if there is $100,000 in that account, it could grow to $216,000 in 20 years without the bad advice, as opposed to $179,000 with the conflict of interest. 
   
   Opponents say conflicts of interest aren't a problem 
   
   Opponents of the new rules argue that most brokers already act the way regulators want them to. 
   
   "If you don’t help someone, they’re not going to continue with you as a client," said Lisa Bleier, managing director at the Securities Industry and Financial Markets Association, an industry group, in a December interview. 
   
   Bleier said the Labor Department’s proposed rules were haphazard, applying only to retirement advisers and not to investment advisers generally. They’d require savers to sign extra contracts, including one the moment they walk in the door, she said, and would expose brokers to frivolous lawsuits. 
   
   Stevenson argues that most savers would be fine with so-called "robo advice" from online services 
   
   I pressed Bleier on the ethical issues involved in advisers receiving commissions or revenue-sharing arrangements. "I don’t see those compensation structures as a problem, no," Bleier responded. "The SEC has approved them." 
   
   The new rule will probably drive a lot of advisers out of the business 
   
   Both Stevenson, the professor and former Obama administration economist, and Bleier agree on one likely effect of the rules: A lot of brokers will stop serving middle-class clients. 
   
   Broker-dealers will have three options: 
   
   They can operate as they do now, but adhere to the new standards. Because it’ll be harder to steer clients toward high-fee products, they’ll make lower commissions — while still risking lawsuits from disgruntled clients. 
   
   They could move away from commissions, charging the client a fixed fee the way registered advisers do. 
   
   They could give up advising entirely. 
   
   In late 2012, the UK passed a set of regulations that were similar to the Obama proposal — but stronger. The regulations not only imposed a fiduciary standard on retirement brokers, but also banned nearly all commissions, while also strengthening disclosure and professional training requirements. 
   
   The result: The number of advisers in the UK fell from about 27,080 in 2009 to 23,640 in 2014, a reduction of about 13 percent, according to the Association of Professional Financial Advisers. 
   
   The revenue generated by advisers was impacted as well. Advisers’ total income never fell, but it stopped growing for three years, from 2011 to 2013. But growth resumed in 2014 with a surge of fee-based income replacing a very large drop in commissions. (Outside factors like the eurozone debt crisis likely influenced advisers’ revenue, as well.) 
   
   In the years since the new rules went into effect, both government and industry have expressed concern about a growing "advice gap" for middle- and lower-income retirement savers. While regulators have said it's difficult to measure the gap — measuring something customers aren’t doing — a research firm called Fundscape found, based on survey data, that many advisers were turning away investors who had less than about $148,000 in total assets. The average British investor has a portfolio of about $30,000. 
   
   Bleier and Stevenson both believe something similar will happen here in the United States — less wealthy clients simply can’t afford the upfront fees charged by non-conflicted investment advisers. But while Bleier sees that as a big problem, Stevenson disagrees. 
   
   Stevenson argues that most savers would be fine with so-called robo advice from online services that use data and algorithms to offer advice based on savers' specifications. Another option: They can read the Vox guide to retirement savings. 
   
   "It’s not about good guys and bad guys," said Stevenson. "These guys are just trying to feed their families. And if they can offer a product where they get a $500 commission versus one where they get an $800 commission — they don’t want to give bad advice, but what if it’s hard to tell?" 
   
   With the fiduciary rule, the government aims to resolve that tension and legally obligate advisers to put aside their self-interest. The result for savers, though, won’t necessarily be better advice. It could be less advice, at least of the kind you get from human beings. 
   
   But that’s okay. Most people don’t need much advice, because the principles of saving for retirement aren’t complicated: Save 20 percent of your income, invest in low-cost index funds, and don’t touch the money until you reach your retirement age. ||||| Arthur Levitt Jr. is a former chairman of the U.S. Securities and Exchange Commission and a director of Bloomberg LP. 
   
   Ronald Reagan used to say that the surest way to live forever was to become a federal program. If that’s right, the surest way to die is to be studied by Congress. In Washington, becoming the subject of legislative scrutiny virtually guarantees inaction, the disappearance of funding and political support, and ultimate demise. 
   
   That’s precisely why congressional Republicans are insisting on the need to “study” further an Obama administration proposal to make financial advisers more accountable. The proposal in question, put forward by the Department of Labor, would target the conflicts of interest that can arise when advisers attempt to steer their clients into high-fee, high-risk investments. 
   
   The Labor Department is attempting to update the fiduciary standard, raising the bar for any advice given by brokers working with retirement investors. If instituted, financial advisers will have to place a client’s interests above their own or those of their firm. That doesn’t seem like too hard a standard to meet, but not all advisers deliver on it. And to this point, nothing in the law has made them do so. 
   
   A change is long overdue. The current proposal has already been studied at length, while the public and affected industries have had their chance to examine the rule, comment on it and suggest changes. Labor Department researchers estimate that the regulation would save more than $40 billion over 10 years in retirement savings. 
   
   Republicans and some Democrats in Congress would apparently rather leave America’s investing public exposed to advisers who serve themselves first and their clients second. But rather than put forward their own ideas to address this problem, they’re attempting to dictate new parameters for the rule that would require it to be rewritten, thus running out the clock before President Barack Obama leaves office. 
   
   As a former broker, I cannot accept the argument that brokers are simply order-takers rather than advisers. Responding to customers’ directions and anxieties invariably involves a dialogue that veers into the area of advice and counsel. 
   
   As chairman of the Securities and Exchange Commission in the 1990s, I’m also intimately familiar with the tactic of “study to kill.” Then, too, the Republicans in control of Congress used the maneuver to stymie important new rules to protect investors. 
   
   In that case, I wanted to keep audit and accounting firms from selling consulting and other high-margin services to their audit clients. My fear was that the audit process -- which is dependent on independence and objectivity -- would be infected by concerns over losing other client work. An audit might be toned down in hopes of winning a lucrative consulting gig from the same client. Or auditors might not share important information with an audit committee so as not to embarrass managers critical to their success on other projects. The risk of self-dealing appeared to be great. 
   
   My fears were well-placed. Major audit firms were later discovered to have allowed such conflicts of interest to affect their judgment; the resulting audits were not of consistently high quality. By the time the proposed rules had finally found their way into law in the Sarbanes-Oxley legislation, it was too late and investors had lost billions of dollars in the 2001-2002 market meltdown and recession. 
   
   Congress is in danger of repeating that mistake. The Labor Department has put forward a proposal after years of vetting, held four days of public hearings and considered comments from thousands of people. There’s no reason to study the issue further, nor any legitimate argument against the proposal itself. A vote to delay the rule further is a vote to kill the rule -- that’s how things work in Washington. 
   
   Among America’s middle-class families, who are struggling to save enough for college and retirement and life’s other big-ticket items, this delay is going to cost money. Billions of dollars in fees will be paid to unscrupulous advisers who aren’t being held to account. I’ve seen this movie before: In the end, whose money matters more: investors' or that belonging to the people they’ve trusted for advice? 
   
   This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. 
   
   To contact the author of this story: 
   
   Arthur Levitt JR at alevitt@bloomberg.net 
   
   To contact the editor responsible for this story: 
   
   Nisid Hajari at nhajari@bloomberg.net ||||| A proposed rule to impose tougher regulations on financial advisers is poised to move forward after opponents failed to persuade lawmakers to derail it.
target: – Americans trying to save for retirement might be pleased to learn that a new law expected next year will require something that sounds obvious: All financial advisers will be required to work in their clients' best interests. As Vox explains, that is "amazingly" not the case now. Two kinds of advisers currently exist: "Registered investment advisers," who tend to work with the wealthy, are held to high fiduciary standards akin to the standards of doctors and lawyers, and they must indeed work in the best interests of their clients. But the other group, "broker-dealers," are more like salespeople who work on commissions. They're required only to provide "suitable" advice, and there's nothing stopping them from steering their middle-class clients into high-fee products that result in fat commissions for themselves. The Obama administration has been trying to tighten the law—to ensure that all advisers put their clients' interests above their own or their company's—and the spending bill that cleared Congress last week all but ensures it will happen. The financial industry had mounted a "last-minute battle" to kill the provision, but it fell short, reports the Wall Street Journal. As a result, the Labor Department is expected to draft the legislation in January ahead of its implementation later in the year. Proponents say that it will save people big money in their IRAs and 401(k)s, while the industry argues that it will drive many brokers out of business and thus put the price of getting investment advice out of reach for many. At Bloomberg View, meanwhile, former broker and SEC chief Arthur Levitt argues that the change is "long overdue."