​Wall Street opposes White House crackdown on financial advisers

WASHINGTON -- Ethyl Sprouse, 68, says she's devastated by the loss of $400,000 from her retirement account. She blames her stockbroker who invested in high-risk stocks despite her order to play it safe.

"I felt like not only had I been betrayed by my broker, I'd been betrayed by the system," said Sprouse. "The system I thought was there to protect me."

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Ethyl Sprouse
CBS News

To better protect retiree savings, the Obama administration has proposed a new federal rule that sounds simple. It demands that any professional investor handling a retirement account - 401(k) or an IRA - give advice "in the best interests" of that client.

Under the current rule, brokers can sell any investment deemed "suitable," but under that standard officials say retirees lose $17 billion a year thanks to hidden fees paid to stockbrokers on investments that make them, not the client, the most money.

"It's the most important thing that we can do to help people saving for retirement," said Secretary of Labor Tom Perez. "That adviser needs to put your best interest ahead of their self-interest."

Most of Wall Street and the insurance industry is pushing back hard, with an ad campaign saying the rule will raise retirement costs for small businesses.

One ad claims it'll make it harder for employees of small businesses to get information their company's 401(k).

The industry complains the new rule is not simple. As written, it's 900 pages long. Peter Schneider, president of insurance giant Primerica, says the rule is too complicated.

"We all agree we must act in the clients best interests, but it's so complex, so onerous and so costly, it's unworkable," said Schneider.

With retirement accounts now a $12 trillion industry, Wall Street is fighting to keep the fee system that pays its brokers billions, but the White House wants savers to keep more of that money and all of those fees disclosed.

  • Wyatt Andrews

    Wyatt Andrews is a CBS News National Correspondent based in Washington D.C. He is responsible for tracking trends in politics, health care, energy, the environment and foreign affairs.