WASHINGTON — There’s a discussion going on right now that is vital to the retirement money you’ve worked so hard to save.

The Labor Department, directed by the Obama administration, is proposing that more advisers, when giving retirement investment advice, put their clients’ best interest first.

You’re probably thinking what I thought after first learning about this. Wait, these advisers aren’t already required to recommend investment products that are in my best interest?

Turns out, not all of them. The difference between who is required to follow that standard and who isn’t comes down to language.

An investment adviser who has a “fiduciary duty” must act in the best interests of clients. A broker-dealer is a firm or individual licensed to sell individual securities. These brokers and other investment professionals who are not fiduciaries don’t have to act in a client’s best interest. Instead, the law says they have to make sure their recommendations are “suitable” for the client.

Let’s say a firm has a mutual fund it wants its advisers to sell. The advisers may be offered bonuses for getting people to invest in the fund, which might carry higher fees than otherwise similar products.

The advisers profit by steering clients to the more expensive investment. The clients’ best interest may not be served because they’ve paid more than necessary. And oftentimes customers are unaware of these backdoor incentives. Either they aren’t told or the disclosure is buried in fine print.

So how much is this conflict-of-interest advice costing investors?

A lot. Seventeen billion a year, according to an analysis by the White House Council of Economic Advisers.

There are, of course, many retirement advisers who put their clients’ best interest first regardless of whether they technically fall under the fiduciary standard. But there is growing concern that investors, many of whom may be retiring soon, will be heavily solicited to roll money out of lower-cost workplace plans and into higher-cost investment products.

Many in the financial industry are apoplectic about the proposed change. They’re fussing about the regulatory cost of implementing it. They argue it would increase the expense of giving advice. They also claim that advisers wouldn’t earn enough to want to service small investors.

Meanwhile, seven organizations – AARP, the AFL-CIO, AFSCME, Americans for Financial Reform, Better Markets, the Consumer Federation of America, and the Pension Rights Center – have launched SaveOurRetirement.com in support of the rule change.

There’s a lot of pressure on the administration to delay any rulemaking. But Labor Secretary Thomas Perez says it’s not a question of if but when.

Get informed. Weigh in on what you think and relay your experiences. Perez says he wants to hear from you. Email your comments to e-ORI@dol.gov and include RIN 1210-AB32 in the subject line. The next comment period will close Sept. 24.

I’ll be writing more on the issue, so let me know what you think, too.

Readers can contact Michelle Singletary at:

michelle.singletary@washpost.com

Twitter: SingletaryM

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