105 Iowa L. Rev. 399 (2019)

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Abstract

Major changes in the retirement plan industry justify further scrutiny of those who provide investment advice because retirement savers are more reliant on them when making investment decisions. However, investment professionals are held to different standards of care when offering advice. Investment advisers adhere to a fiduciary standard, which requires them to act in the best interests of their client when providing investment advice. In contrast, broker-dealers are subject to the much lower standard of suitability, which only requires broker-dealers to provide suitable investment advice. Unfortunately, the suitability standard has allowed broker-dealers to provide advice despite having conflicts of interest. Investors are harmed as a result. The Employee Retirement Income Security Act of 1974 (“ERISA”) was enacted to protect retirement plans, but much of the investment advice given today falls out of ERISA’s scope. Both the U.S. Department of Labor and the U.S. Securities and Exchange Commission have attempted reforms in order to provide further protection, but have fallen short. Therefore, Congress must amend ERISA to impose a fiduciary standard on broker-dealers to minimize conflicted advice for ordinary people attempting to save and invest for retirement.