Biden promises to eliminate junk fees on retirement accounts

(NewsNation) — President Joe Biden spoke Tuesday about Americans’ retirement security, focusing on “junk fees” charged by financial advisers.

So-called “junk fees” have been a focus of the Biden administration as the president seeks to tamp down on hidden costs for consumers. The president reiterated his commitment to building an economy from the “middle out and the bottom up” with a focus on working families.

“If you come from a middle-class family, the thing that makes you the angriest is when you’re taken advantage of,” Biden said.

He unveiled a proposal by the Labor Department that would require financial advisers to act in the interest of account owners rather than in the interests of the investment firm. While a previous law passed in the 1970s does cover financial advisers and their fiduciary duty to clients, the president noted those laws, passed when pensions were common and 401Ks didn’t exist, had not kept up with the times.

Biden specifically called out annuities, which are purchased for a set amount and are meant to deliver a consistent amount of money year over year during retirement. While annuities can be a good investment for consumers, Biden noted self-serving annuities that benefit brokers can drain people’s savings accounts and leave them with much smaller payouts than expected.

The president noted bad financial advice can cost up to 1.2% of a retirement plan per year, an amount that doesn’t sound very large but that can add up to tens of thousands of dollars over time.

Under the new rule, financial advisers and brokers would be obligated to act in their client’s best interests, not their own. The rule is meant to close loopholes in earlier laws, and financial advisers who violate it would face penalties that could include paying restitution along with additional fines.

Biden noted the rule, which is not yet finalized, would benefit both consumers and honest financial advisers who are facing unfair competition from less-than-honorable brokers.

Previously, the president has focused on fees charged by travel companies, ticket sellers, rental companies, banks and other businesses consumers are unaware of when they decide to make a purchase. He specifically highlighted his efforts to eliminate charges for basic banking services, like checking a bank account balance or accessing old financial records.

Biden characterized his campaign against junk fees as an issue of fairness, noting consumers should be able to see the price they will be charged for an item or service up front instead of being surprised by hidden fees at checkout and that honest businesses shouldn’t be undercut by competitors who have hidden fees.

“Every American willing to work hard should be able to obtain the American dream,” Biden concluded.