Apr 07, 2016 06:06 AM EDT

Labor Department Sets Retirement Rules: New Standards Transform Financial Advice

By Jane Reed

Americans have been looking to the future and that also means preparations for retirement. Recently, the Labor Department has announced new standards that may transform the financial advice given to Americans who are saving for their retirement. What's different now? Washington Post has it that brokers and financial advisers will be required to put their clients' interests first.

This will pave the way for a more stricter regulation that will require brokers and financial advisers to recommend products and packages that are most suitable to their clients - even if it will not be the investor's best option.

Millions of Americans have not been able to enjoy their retirement fully. And mom-and-pop groups have always been in charge of their own retirement funds. This new regulation will allow retirement security - another layer of protection that will guard Americans from a bad investment advice. The rule is supposed to improve disclosures and to reduce conflicts of interest, such as cases when a firm is paid by a mutual fund company or other third party for recommending a particular investment.

Thomas Perez, secretary of the Labor Department, said that, "This is a huge win for the middle class. In far too many places and on far too many issues, the rules no longer work for working people." This would also mean lesser complaints from retirees where they were pushed into complicated and expensive investments. While the new rule won't ban commissions, brokers may have to explain why they are recommending a particular product when a less expensive option is available, and they could face scrutiny if they recommend complicated products.

Even Sen. Elizabeth Warren is heavily promoting the new financial ruling. "Hard workers need every dollar to work for them," Warren said.

While it's too early to find out how this new ruling will play out, analysts Michael Wong says, "We're definitely going to see investors that are forced to change how they interact with the investment services industry."

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